Interactive Investor

21 top funds and trusts for regional markets

12th January 2016 10:10

Helen Pridham from interactive investor

A panel of collective investment experts pick out the funds and investment trusts they believe offer the best access to regional stockmarkets - Europe, the US, Japan, Asia and emerging markets.

Europe

Schroder European Alpha Plus

Core growth - 1 yr +6.3%; 3 yrs +17.9%; yield 0.4%

For investors who believe that Europe is due for a bounce in 2016, Brian Dennehy suggests Schroder European Alpha Plus. It has a concentrated portfolio, typically of between 35 and 60 holdings in large or mid-sized companies. Dennehy says: "It is positioned to take advantage of outperformance of consumer cyclical stocks and financials, while being underweight expensive defensive stocks."

Marlborough European Multi-Cap

Adventurous core growth - 1 yr +19.5%; 3 yrs +40.5%; yield 0.3%

Although Marlborough European Multi-Cap can invest in companies across the size scale, Tony Yarrow likes the fact that it tends to focus on smaller and micro companies which he believes may do well in 2016. Fund manager David Walton pointed out recently that, contrary to expectations, larger company stocks were the more volatile in 2015.

Invesco Perpetual European Equity Income

Growing income and growth - 1 yr +1.9%; 3 yrs +54.3%; yield 3.1%

With interest rates remaining low, Gavin Haynes says investing in dividend-producing European equities, as does Invesco Perpetual European Equity Income, will continue to be a good strategy. "Manager Stephanie Butcher has been positioning the portfolio to exploit unloved and lowly valued areas of European equity markets," he says. Butcher is also increasingly optimistic about economic recovery in Europe in 2016, at both country and company level.

Jupiter European Opps Trust

Core growth - SP 1 yr +26.9%; 3 yrs +70.1%; yield 0.6%

Andrew McHattie describes Jupiter European Opps as a quality play with a sparkling track record. "Alex Darwall's trust benefits from a diligent bottom-up process that delivers consistent outperformance," he says. "The manager does not try to forecast the outlook for share prices, but looks for exceptional companies he expects to be winners through the cycle. Europe still has good companies even if the macroeconomics look challenging."

European Assets Trust

Core income - SP 1 yr +14.5%; 3 yrs +93.3%; yield 5.3%

Alan Borrows is similarly positive about Europe, and likes European Assets because it invests in mid to smaller companies and has a decent yield - albeit partly funded from capital. Peter Hewitt is also backing the trust, because he thinks manager Sam Cosh is a top-class fund manager and also because it focuses mainly on mid-caps. "Profits are recovering quite strongly in Europe, helped by cost-cutting, and mid-caps offer exposure to the domestic economy, which has emerged from recession into a bit of a recovery," he says.

TR European Growth Trust

Adventurous growth - SP 1 yr +15.4%; 3 yrs +92.3%; yield 1.2%

Jean Matterson also opts for a smaller company trust in Europe. "Ollie Beckett, who manages TR European Growth, has a record of selecting mid and small-cap companies that can grow regardless of the economic situation," she says. "We expect the performance to be more volatile than the market, but longterm returns should prove rewarding."

North America

Fidelity Index US

Core growth - 1 yr +7%; 3 yrs +64.6%; yield 1.3%

The legendary investor Warren Buffett once suggested that for most investors wanting exposure to US equities, an index fund was best. Robert Burdett tends to agree: "If you review the fund data for this sector, it is hard to argue otherwise, unless you have time and access to the tools to dig deeper into the analysis." He tips Fidelity Index US as a good place to start.

Findlay Park American

Core growth - 1 yr +4.8%; 3 yrs +52.7%; yield 0% (dollar denominated)

Mick Gilligan is a long-term fan of Findlay Park American: "The managers look for businesses that have significant upside on a two to three-year view, where the merits have not been widely appreciated by the market. This creates a portfolio of stocks that should prove resilient in a downturn but can perform reasonably in an up market." The trust can invest in Canada and Latin America as well as the US.

Artemis US Extended Alpha

Adventurous growth - 1 yr +16.7%; 3 yrs n/a; yield 0.1%

Artemis US Extended Alpha combines a traditional long-only portfolio of US stocks with a small number of short positions. Robert Burdett believes this structure could prove useful next year. "It allows the manager to use his stockpicking skills to profit from falling as well as rising share prices, which may prove particularly helpful at times in 2016, with valuations at elevated levels and monetary policy at the Fed in focus," he says.

Canadian General Investments Trust

Adventurous growth - SP 1 yr -10.9%; 3 yrs +16.7%; yield 2.5%

Andrew McHattie is the only panellist to pick a North American trust. "It's easy to find reasons to shun Canadian General Investments," he says. "It has a majority family holding, exposure to the energy-heavy Canadian economy, no share buybacks and an historically awkward yield policy. On a 27% discount though, you get cheap access to a sensible manager and a rising dividend, and maybe a tailwind from an undervalued Canadian dollar."

Japan

Baillie Gifford Japan Trust

Core growth - SP 1 yr +23.9%; 3 yrs +136%; yield 0%

Jean Matterson believes Baillie Gifford can extract value from the Japanese market. "Japan is changing. The government is trying to boost the economy and companies are becoming more shareholder-friendly. Many are seeing increased margins and good earnings growth," Matterson explains. She likes the trust despite its premium rating, because manager Sarah Whitley has "an enviable record of adding value in a difficult environment". Peter Hewitt similarly favours BGFD because it has "a very good stockpicking approach".

Baillie Gifford Japanese

Adventurous growth - 1 yr +10.1%; 3 yrs +61.1 %; yield 0%

John Husselbee sees plenty of long-term value in Far East investment, even though many markets have lagged over the past couple of years; but his preference is Japan. "It is well placed to recover through both domestic reform and a modest positive global growth environment," he says. He too thinks Baillie Gifford's Edinburgh-based Japanese team will achieve the best results.

CF Morant Wright Japan

Adventurous growth - 1 yr +19.7%; 3 yrs +57.6%; yield 0%

Morant Wright are Japanese equity specialists; CF Morant Wright Japan targets absolute returns from a diversified portfolio of Japanese firms. Mick Gilligan likes the approach: "The team uses a value-orientated screening process in which balance sheet analysis and valuation metrics are used to highlight companies with strong financial positions and sound business franchises."

Asia

Stewart Investors Asia Pacific Leaders

Core growth - 1 yr -3.4%; 3 yrs +18%; yield 0.3%

A solid choice for core exposure to the recovery prospects in Asia after a difficult 2015, is how Gavin Haynes describes Stewart Investors Asia Pacific Leaders. He adds: "Despite a change in lead manager following Angus Tulloch's decision to step back, I hold the team in high regard; new lead manager David Gait has a strong track record and I believe he will maintain the same approach."

Schroder Oriental Income Trust

Core growth and income - SP 1 yr -1.7%; 3 yrs +14.9%; yield 4.4%

"Asia is one of the cheapest markets at present, and offers long-term potential for strong capital gains as well as income growth," comments Tim Cockerill. He thinks Schroder Oriental Income is an ideal way to gain exposure because it has "a very experienced manager, a yield of over 4% and the best returns in the sector".

Aberdeen Asian Income Trust

Adventurous income and growth - SP 1 yr -20%; 3 yrs -13.9%; yield 5.5%

Alan Borrow's contrarian approach means he is willing to back managers such as Aberdeen who have not done well recently. "We have not lost faith in Aberdeen's Asian team. Its 'quality at the right price' philosophy appeals to us, and no investment process works all the time. In addition, Aberdeen Asian Income offers a good yield and has fallen from a premium to a discount," he says.

Emerging markets

Hermes Global Emerging Markets

Core growth - 1 yr -5.4%; 3 yrs +16.9%; yield 0%

Robert Burdett likes Hermes Global Emerging Markets because of its flexibility: "It has the ability to deliver performance in a range of market conditions given its investment process, which integrates top-down and bottom-up elements," he says. The manager considers the best countries for growth, then looks for quality companies on attractive valuations.

Newton Global Emerging Markets

Core growth - 1 yr -8.3%; 3 yrs +17.5%; yield 2.3%

Brian Dennehy is attracted by the quietly impressive track record Newton Global Emerging Markets has built up since its launch in 2011. Its managers believe that investment in emerging market equities must be considered in a global context. Dennehy says of the managers: "They certainly have the temperature of these markets right now, and running a small fund means they can be much more nimble than typical alternatives."

Somerset Emerging Markets Div Growth

Growing income - 1 yr -7.6%; 3 yrs +3.7%; yield 2.3%

Somerset is a boutique company focusing on emerging market investment and Tony Yarrow is a fan of Somerset Emerging Markets Div Growth's manager, Edward Lam. Another plus is that the fund's dividend yield target is on the low side, which gives the manager scope to invest for income and growth. While Lam is not particularly optimistic about the sector, Yarrow believes the stronger emerging economies could rerate in 2016.

Genesis Emerging Markets Trust

Core growth - SP 1 yr -18.6%; 3 yrs -12.7%; yield 0%

John Newlands believes the setback in emerging markets offers scope for smart stockpickers such as Genesis. "Around three-quarters of its portfolio is in larger businesses, with a long tail of smaller holdings spread across many emerging markets," he says. He adds that the double-digit discount is also an attraction.

BlackRock Frontiers Trust

Adventurous growth and income - SP 1 yr -11.1%; 3 yrs +40.5%; yield 4%

Newlands says BlackRock Frontiers Trust offers exposure to the some of the world's fastest-growing economies. Its managers have done a creditable job since launch in December 2015, despite far from ideal market conditions, and the trust has a useful yield. "The managers cast their net wide," comments Newlands, "with the three largest holdings including a Ukrainian poultry and biosecurity firm, Kuwait Foods and a Pakistani utility company."

The panel

Brian Dennehy is managing director of advisory firm Dennehy Weller. In 2012 he launched Fund-Expert, a fund platform for self-directed investors, which provides research for choosing funds.

Tony Yarrow set up his own firm, Wise Investment, in 1992; he is now chairman of the firm and manages portfolios for clients as well as two in-house investment funds.

Gavin Haynes is managing director of Whitechurch Securities, which provides discretionary portfolio management to private clients. He has been managing fund portfolios since 1997.

Andrew McHattie runs the McHattie Group, an authorised firm that publishes specialist investment newsletters. He has been the editor of Investment Trust Newsletter since 1996.

Alan Borrows is a senior fund manager at Liverpool-based Seneca Investment Managers, which favours a value-oriented approach to multi-asset investment.

Jean Matterson is a partner and chief investment officer of Rossie House Investment Management, which she joined in 1996 after 20 years in the investment business with Stewart Ivory.

Robert Burdett began managing funds at Rothschild and then Credit Suisse. In 2007 he joined Thames River to help set up its multi manager business, later taken over by F&C.

Mick Gilligan is a partner in private client stockbroker Killik & Co., where he is currently head of research. He analyses funds and trusts and manages the firm's multi-manager portfolio service.

John Husselbee is head of the Liontrust multi-asset team. He has 25 years of experience in managing multi-manager portfolios, including at Henderson and Rothschild.

Tim Cockerill is investment director of Rowan Dartington, a Bristol-based wealth manager. Investment trusts have featured in its portfolios for many years. Rowan Dartington offers discretionary and advisory services.

John Newlands has overall responsibility for investment trust research at wealth manager Brewin Dolphin. He is supported by fund analysts who cover specific sectors, researching both open and closed ended funds.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.