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AJ Bell’s six ISA funds for investors of all risk tolerances

27 March 2024

The platform highlights funds worth considering before the ISA deadline next week.

By Jonathan Jones,

Editor, Trustnet

Personal Assets Trust, BlackRock Continental European Income and Baillie Gifford Global Alpha Growth are all funds worth considering for any last-minute ISA allowances, according to AJ Bell head of investment research Paul Angell, but which you buy will depend on your tolerance for risk.

The ISA deadline is fast approaching. Savers only have one week left to make the most of the £20,000 ISA and the £9,000 junior ISA allowances available to them.

But it is imperative that the money is not just added and forgotten about, remaining uninvested for years. As such, below Angell highlights options for investors ranging from the cautiously minded to those willing to be a bit more adventurous.


Cautious investors

For those unwilling to stomach heavy losses, bonds could be a good option at present and the AJ Bell head of investment research’s first suggestion is the £1.2bn TwentyFour Corporate Bond fund headed by Chris Bowie and Gordon Shannon, who are part of a five-person team.

“The managers of this risk-aware sterling corporate bond fund target superior risk-adjusted returns versus peers and the fund is therefore often cautiously positioned within its peer group,” said Angell.

Performance of fund vs sector since launch

Source: FE Analytics

With a yield of around 6% its income “is still attractive” even in the face of higher interest rates from savings accounts and Angell said the fund should be able to deliver this level of return over the next 12 months, with the additional benefit of capital gains on top should rate expectations fall.

For those that want some equity risk but still want to rest easy at night, Angell also highlighted Personal Assets Trust managed by FE fundinfo Alpha Manager Sebastian Lyon.

“This is a defensively managed multi-asset investment trust where the experienced manager puts a high degree of emphasis on capital preservation. The trust is long-only, with concentrated equity holdings and low turnover,” he said.

It typically invests in equities, government bonds and gold, and shifts between them depending on market opportunities.

“At the time of writing, the trust is defensively positioned, with the bulk of the trust held in government bonds, mostly inflation linked, with 10% in gold bullion and 25% in equities. The trust is not typically geared, and a discount control mechanism (DCM) is in place. This DCM keeps the trust’s share place trading close to its net asset value (NAV),” said Angell.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

Although the fund is less volatile than the market, because it does invest in stocks there is no guarantee it will protect capital, although its long-term performance has been far less volatile than both the market and peers, while making decent returns.

Balanced investors

One notch up the risk scale, Angell suggested balanced investors should be looking to invest in equities solely. His first selection was the £1.5bn BlackRock Continental European Income fund managed by Andreas Zoellinger and Brian Hall.

It currently yields 3.64% and has been an above-average performer in the IA Europe Excluding UK sector over the past decade, as the below chart shows.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

“This European equity fund is managed with a concentrated approach without reference to its benchmark. The fund’s manager looks to identify quality companies with a high but sustainable dividend yield coming from a strong balance sheet and stable earnings,” he said.

“In addition, the fund will also look to identify opportunities in companies that have the opportunity to deliver long-term dividend growth but may currently yield less than the broader market. The result is to build a diversified portfolio that offers both a reliable and growing income over time.”

Those unsure of investing regionally could look towards a thematic play such as the £2.2bn Polar Capital Global Insurance fund managed by Nick Martin and Dominic Evans.

“This fund has many of the elements that make for a great specialist strategy. A genuine niche in market exposure (non-life insurance businesses), an experienced and specialist team and committed corporate backing from Polar Capital,” said Angell.

The fund, which has been the best performer in the IA Financials and Financial Innovation sector over the past decade, focuses on book value growth.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

The managers target at least 10% book value growth each year, which Angell said should, over time, lead to an equivalent share price growth and therefore a doubling of capital returns for the fund every seven to eight years.

Now could be a good time to get into the sector, he added, as there are two structural tailwinds for the insurance industry. “Firstly, increased risk complexity within the insurance market, such as cyber risk, increases the premiums charged. Secondly, higher risk-free interest rates boost the investment yields earned within investment portfolios,” said Angell.

Adventurous investors

Lastly, for those with long  time horizons who can afford to take more risk, Baillie Gifford Global Alpha Growth could be a good option.

The £2.8bn fund has had a torrid three years but is ahead over the long term and remains a strong option, according to Angell. It managed by Malcolm MacColl and Spencer Adair, as well as Alpha Manager Helen Xiong – the same team behind the Monks investment trust.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

“This is a long-term global equity strategy invested in growth-oriented companies. The fund therefore follows the investment style that is firmly embedded throughout Baillie Gifford,” he said.

“The investment process is entirely driven by bottom-up stock research stemming from a belief that companies which have the potential to grow at a faster rate and on a more sustainable basis than their peers are positioned for higher long-term returns.”

Another fund struggling over the short term but with an enviable long-term record is Worldwide Healthcare Trust. Managed by OrbiMed, the world’s largest specialist healthcare fund management company, the £1.8bn trust has a growth approach to what is traditionally a more defensive industry within equity markets.

Managed by Sven H Borho and Trevor Polischuk, Angell said three and five-year returns have been “disappointing” thanks to the portfolio’s large weightings within emerging markets and the emerging biotech sector.

Performance of fund vs sector and benchmark over 10yrs

Source: FE Analytics

“The trust has also swung to a 10% discount over the period. However, the managers believe that fundamentals within biotech remain attractive, with supportive valuations and increasing M&A expected across the sector, particularly given the increased investor attention towards innovation within drugs and related technology,” he said.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.