UK large caps – Majedie UK Equity Fund and iShares Core FTSE 100 ETF
Absolute return – Henderson UK Absolute Return Fund
Ryan Hughes, head of fund selection at AJ Bell, comments:
“The hung parliament result leaves investors in a state on confusion trying to work out what this means both in the short term and longer term. With question marks over Theresa May remaining as Prime Minister, Brexit negotiations about to start and many of Labour’s policies seen as anti-business, this high level of uncertainty has the potential to create an extended period of volatility for investors in the UK. While easily said, the key thing for investors to do is not to make knee jerk reactions. Most will be long term investors and in the grand scheme of things, if you have 20 years to go until retirement, events overnight are unlikely majorly impact the financial plan.
“For those who are still looking to invest or have existing holdings and want to think about how to position for this period of instability, there are some things to think about. The place where uncertainty is likely to be felt most is in the currency markets. Sterling has weakened as investors move away from the currency and this can be positive for some investments. Those investors who have exposure to overseas equities will have seen this last year following the Brexit outcome and closer to home, with the FTSE 100 Index being so reliant on overseas earners, this may be a place to look for returns. One way of gaining exposure to this is through the Majedie UK Equity fund which has a large cap bias and has an excellent track record of investing in UK equities, while those preferring passive solutions may like the iShares Core FTSE 100 ETF.
“For those a little more uncertain, an absolute return approach may be interesting. These managers can make money from both rising and falling share prices and may be well placed to capitalise on the instability in the market. While these types of funds are not necessarily trying to make large profits, they do often protect capital when the environment is more challenging. In this space, our preferred choice in the Henderson UK Absolute Return Fund. Run by the highly experienced Luke Newman and Ben Wallace, their risk controlled approach is attractive for those wanting to have some exposure to equities but without taking all of the risk that comes with buying a traditional equity fund. While, if UK equities do perform well, this fund will be left behind, should things get ugly, they have proven on many occasion that they are great at protecting investors capital making it a great choice for those looking to diversify away from traditional long only investing.”