New bond and small cap funds join AJ Bell investment ideas lists

The AJ Bell Favourite funds and Investment trust select lists are aimed at lightening your research load. There are thousands of funds and hundreds of trusts out there – so we’ve narrowed the field by selecting a high-quality shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.

What have we changed?

We keep both lists under constant review to ensure we have the highest conviction in our selections, and to find new names with better potential to achieve their objectives.

As a result of this work, we’ve added the Schroder Strategic Bond and Artemis SmartGARP Global Smaller Companies funds to the Favourite funds list. At the same time, we have removed the Waverton Sterling Bond and abrdn Global Smaller Companies funds from the list. We’ve also removed the Aberdeen UK Smaller Companies Growth Trust from our Investment trust select list, following the announcement of its proposed merger with the JPMorgan UK Small Cap Growth & Income trust.

Adding a new bond option to the Favourite funds list

Of the two new names on the Favourite funds list, Schroder Strategic Bond Fund is a flexible bond strategy that can invest across a wide range of bond markets around the world, including government bonds, corporate bonds, high yield bonds, emerging market debt and asset-backed bonds. The fund is led by Julien Houdain and Martin Coucke and supported by Schroders’ wider fixed income business.

At the heart of the strategy is an adaptable approach that combines economic analysis with detailed bond research. This approach allows the managers to adjust the portfolio as conditions change while remaining focused on bond valuations and portfolio risk.

We believe Schroders’ depth of capabilities, alongside the fund’s intelligent design and the calibre of the fund’s portfolio managers make this an attractive investment option for investors looking for a diversified bond exposure within a single fund.

To make room for the Schroder Strategic Bond fund, we’ve removed the Waverton Sterling Bond fund from the list. Our conviction in the fund has weakened following the retirement of long-standing lead manager Jeff Keen. In addition to this, the fund’s primary focus on higher quality bonds (minimum 80% investment grade) hinders its return potential in comparison to the more flexible approach of the Schroder Strategic Bond fund.

A new small cap fund makes the list

We’ve also added the Artemis SmartGARP Global Smaller Companies fund to our list. The fund is the most recent addition to Artemis’ SmartGARP franchise and invests in smaller companies around the world, across both developed and emerging markets. We like the consistency and repeatability of the team’s investment approach, which is built around a Growth at a Reasonable Price discipline. In practice, this means looking for companies with attractive growth prospects, but only where the valuation remains sensible. The team use data to search for businesses whose share prices appear out of step with their underlying earnings, cash flow and financial strength.

We believe the team’s data-driven investment approach is particularly appealing when investing in global smaller companies, where the opportunity set is large and diverse.

To make way for Artemis SmartGARP Global Smaller Companies, we have removed the abrdn Global Smaller Companies fund from the list. The abrdn fund has failed to keep pace with both peers and its benchmark over recent years. While its quality growth investment style has at times been out of favour, stock selection has also proved disappointing, particularly in the US portion of the portfolio. The team has made changes to address this, including making greater use of Aberdeen’s US smaller companies team, but we’re not yet convinced these changes will be enough to restore the fortunes of the fund. With Artemis SmartGARP Global Smaller Companies now available, we believe investors are better served by a fund with a more repeatable, consistent and clearly defined investment process. 

Why have we removed a trust from the Investment trust select list?

The Aberdeen UK Smaller Companies Growth Trust is expected to combine with the JPMorgan UK Small Cap Growth & Income Trust towards the end of 2026, subject to shareholder approval. If the transaction goes ahead, shareholders in the Aberdeen trust will receive shares in the enlarged JP Morgan trust, unless they choose a cash exit option, which is subject to the limits set out in the transaction terms.

Though the two trusts have some overlap, the JP Morgan trust has an unusual dividend policy – it targets a 4% annual yield, paid from a combination of income and capital returns. This can appeal to investors looking for income, but it makes the trust a less straightforward selection for many UK Smaller Companies investors who are looking for long-term capital growth in their investment.

We aren’t adding a replacement trust at this stage. That’s because we don’t believe there is a stand-out alternative, and customer demand for a dedicated UK smaller companies option is limited. That said, we’ll continue to monitor the sector and may add an alternative trust in future if we identify a good fit.

Keep in mind that UK smaller companies are represented on our AJ Bell Favourite Funds list – in the form of the WS Gresham House UK Smaller Companies fund.

We hope you find this update useful. The AJ Bell Investment trust select list and the Favourite funds lists are designed to help you choose your investments but aren’t a personal recommendation. If you own trusts or funds not included on either list, it doesn’t mean we recommend that you sell them. If you’re not confident about making your own financial decisions, or are looking for advice, you should speak to a suitably qualified financial adviser.

Remember that the value of investments can change, and you could lose money as well as make it.

Please also remember that it falls to you to monitor and manage your own investments and to make any changes you think are necessary. Keep in mind this is information only, and not a personal recommendation to buy or sell any of the funds referenced above.