Equity funds still offer excellent opportunities for long-term investors
Rob Pemberton of HFMC Wealth
A few months of ups and downs on the stock market has reminded investors that the value of their money won’t always move in a straight line. However, Rob Pemberton, investment director at HFMC Wealth, thinks shares still offer the best opportunity over the long term.
According to Pemberton, 59, they have beaten government bonds, corporate bonds and cash over the past 100 years, and he believes they will continue to do so. We asked the adviser, where he would invest £10,000.
Lindsell Train UK Equities
Nick Train is one of the very best fund managers in the UK, with a fantastic long term record of beating the FTSE All-Share index. He runs a concentrated portfolio, investing in the shares of just 25 companies that he believes are “exceptional”. Train favours companies with established brands that have a strong track record of generating profits. These are typically in the consumer goods, media and pharmaceutical sectors, so among his top investments you will find drinks company Diageo, fashion firm Burberry and Marmite-maker Unilever.
The fund has returned 46.3% over three years compared with a sector average of 27.5%. The ongoing charge is 0.7%.
Jupiter UK Special Situations
Another UK Equity fund with a strong long-term record, this one invests in large and mid-cap companies. It has been managed for more than a decade by Ben Whitmore, who takes a value approach to investing, picking unloved stocks he thinks are misunderstood by other investors. He particularly focuses on companies that have strong balance sheets, with current investments including BP and Standard Chartered. This is an example of a fund that looks a bit risky but has the potential to deliver huge rewards if you are investing over the long term.
The fund has returned 36.5% over three years, compared with a sector average of 28.9%. The ongoing charge is 0.76%.
FP WHEB Sustainability
Responsible investing is becoming more popular, particularly among younger investors who want to know that their money is having measureable social and environmental impact as well as producing financial returns. Responsible and sustainable funds have battled a preconception that if you invest in this way, you sacrifice financial returns, but many have proved that is not the case. The WHEB Sustainability fund focuses on the opportunities created as we move towards becoming healthy, low-carbon and sustainable economies. It invests in sectors including health, water management and clean energy. However, it’s not just about a feel-good factor; it is looking for financially strong companies. Top investments including Xylem, which designs and manufactures equipment for water management, and Thermo Fisher, which provides analytical instruments for research and diagnostics in the healthcare industry. It has returned 50.6% over three years, compared with a sector average of 52.1%. The ongoing charge is 1.03%
Baillie Gifford Global Discovery
Baillie Gifford has an excellent reputation as an investment house. This niche fund invests in small companies that stand to benefit from structural changes in the world, including those in technology or the environment. Much of its investments are in the healthcare and software sectors, and it backs companies involved in gene editing, medical imaging and electric vehicles. While the smaller firms it invests in may be more volatile, its performance has been spectacular. About 65% of the fund is invested in American companies such as online home goods retailer Wayfair and online textbook rental and tutoring firm Chegg.
The fund has returned 100.6% over three years, compared with an average of 52.1%. While this rate of growth may not continue, I believe it will still do well. The ongoing charge is 0.78%.