With Brexit hanging like a black cloud over the UK, investors face some difficult decisions when deciding how to position their portfolios for 2019.
Ryan Hughes, head of active portfolios at AJ Bell, looks at four fund options investors could consider until the political landscape becomes clearer:
Cautious – Janus Henderson UK Absolute Return
“Finding cautious areas to invest over the next 12 months may well prove to be challenging particularly with corporate bonds remaining unappealing. Equally, UK equities may well be challenging given Brexit issues and as a result, the flexible approach of the Janus Henderson UK Absolute Return fund could be useful. With the ability to move both long and short, if equity markets continue their recent volatility into next year, protecting capital may be a greater consideration than outright growth. If that is the case, manager Luke Newman and Ben Wallace have proven before that they have the skillset to profit when markets become difficult. While it’s not a cheap fund, if the managers are able to deliver positive returns when the market is down, they will have earned their fees.”
Balanced – Newton Global Income
“Given the uncertainty heading into 2019, focusing on a fund with a proven and repeatable investment process may be a sensible move. The Newton Global Income fund has a simple approach that looks at large companies that offer a dividend yield of 25% greater than the FTSE World Index. Focusing on high quality, cash generative companies tends to offer defensive characteristics when markets become volatile but importantly the strategy over time looks to deliver steady long term returns underpinned by the dividend yield. The fund is tried and tested with manager Nick Clay very experienced which makes this fund a solid core for a balanced investor.”
Adventurous – Polar Capital Global Insurance
“Insurance never sounds like the most exciting of investment ideas but in many ways that’s precisely the appeal. It’s a sector that often goes under the radar but insurance companies have a fantastic ability to generate cash regardless of the economic environment, as we all know through our ever increasing insurance premiums! Polar Capital Global Insurance is highly unusual in focusing on this area but they are experts in this specialist field and this comes through in the quality of management. The strategy has relatively low correlation with global equities and therefore adds useful diversification to an existing portfolio of traditional equities.”
Income seekers – Troy Trojan Income
“UK equities have become well and truly out of favour not just with UK investors but with overseas investors too. This has seen many traditional UK equities sell off to the point when many are yielding well above long term levels. The Troy Trojan Income fund, managed by Francis Brooke takes a long term approach with an aversion to capital losses which gives a focus on companies that others are shunning. As a result, this UK equity income fund with a strong long term record is now yielding over 4%. Should Brexit take a turn for the worse, this fund is defensive and may offer some protection from any sharp equity falls in the UK market.”