AJ Bell's top fund picks for 2018

2017 has been an interesting year for retail investors. With equity markets hovering around record levels many portfolios will be looking very healthy but this also raises the question of whether we are reaching the end of the bull-run and are moving into bubble territory.
7 December 2017

The end of the year is a natural time for investors to review their portfolios and think about how they are positioned as we move into 2018. 

Ryan Hughes, head of fund selection at AJ Bell, outlines his top fund suggestions for 2018 to suit different risk appetites, as well as for those investors looking for income, absolute return and fixed income exposure:

“Calling the top of the market is simply a guessing game and we currently have some of the most experienced investors in the market at odds over the outlook for equities.  For investors running their own portfolios the best course of action will be to have a clear understanding of how much risk they are prepared to take at the moment, position their portfolio accordingly and sit tight.”

Cautious – Troy Trojan

“With equity markets around all-time highs and fixed interest markets looking challenged, a multi asset solution that takes an absolute return mind set could prove sensible for a cautious investor. Troy Trojan, managed by Sebastian Lyon looks to deliver growth over the long term but importantly has a very clear eye on protecting capital. The portfolio has exposure to equities, bonds, cash and gold, making it well diversified and giving investors an instant portfolio. Should volatility increase next year, this fund is well placed to protect investors.”

Balanced – Crux European Special Situations

“The European economy has been recovering strongly during 2017 with every sign that this is likely to continue into 2018 as corporate earnings continue their good momentum. With this supportive backdrop, the Crux European Special Situations fund could be well placed to benefit. Managed by the veteran Richard Pease, this fund focuses on companies that have exceptional management and a market leading position. Pease uses his many years’ experience to identify good management teams and is happy to invest in a high conviction manner away from the benchmark. This approach typically finds more opportunities in medium and smaller companies and while it can be more volatile than its competitors, it is proof that talented bottom up stock pickers can add significant value.”

Adventurous – Baillie Gifford Japanese

“Japan had a strong year in 2017 as the economic reforms that have been taking place over the past few years continue to bear fruit. The tailwinds remain in place for 2018 and coupled with a rapidly improving shareholder focus from company management this should help the Japanese market move higher next year. The team at Baillie Gifford are one of the strongest around and are well placed to cope with the retirement of the head of the team. With a strong focus on stock picking and a willingness to look different to the index, this is a good choice for higher risk investors.”

Income – River & Mercantile UK Equity Income

“The UK market is a mature dividend paying market and therefore remains a solid choice for income seekers. While the largest few funds in the sector have historically taken the bulk of assets, some strong choices exist if you look a little further afield. Dan Hanbury at R&M is a very experienced manager and with a quantitative screen underpinning the process, this diversified portfolio will be a good foil to other better known equity income funds.”

Alternative – Artemis Pan European Absolute Return

“The European economy has been improving rapidly through 2017 and has now gained some crucial positive momentum. One way of capitalising on this without taking on all of the risk of the equity market is through a long / short equity fund. Manager Paul Casson is a high quality stock picker who understands his investment process and his ability to identify both strong and weak companies well. His net exposure is around 50% meaning that he is well placed to capture some market upside but should there be some market volatility, he is likely to fall less than the market and protect investor’s capital.”

Fixed Interest – Fidelity Strategic Bond

“With higher inflation, the gradual withdrawal of QE and higher interest rates, the back drop for fixed interest in 2018 looks more challenging than it has done for some time. Therefore, the cautious nature of Ian Spreadbury could well prove to be useful in 2018 while the flexibility offered by the Strategic Bond fund gives the manager the tools to look to still make money. With extensive resources at Fidelity, the team now look to add value through relative value trades around the world as well as traditional UK gilts and bonds giving an extra source of potential return. The extensive experience of Ian Spreadbury could well prove beneficial over the coming months.”

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