A dozen funds to consider for your ISA – whatever type of investment you favour

Rob Burgeman, senior investment manager at wealth manager RBC Brewin Dolphin

Maximising the use of your ISA allowance this and next year are even more important than in previous years, with other tax allowances being cut from April 2024. Use as much of the £20,000 allowance either side of 6 April as you can afford to if you want to shield your investment from the cuts in dividend, capital gains, and interest income allowances. A professional adviser will be able to help you navigate what you are allowed and identify the most appropriate investments and assets to place within the tax-free ISA wrapper.

Many of the themes from last year have continued on into 2024, which is reflected in some of these fund suggestions. What category of fund you want to consider will depend on your attitude to risk and your financial objectives. If you are risk-averse, then opting for an adventurous option may not be the best choice – speak to a financial adviser before making any significant investment decisions and they will be able to build a portfolio of assets that will reflect your situation.

Cautious

Ruffer Diversified Return – Ruffer targets a positive total annual return, regardless of market movements. It invests in a range of asset classes, geographies, and sectors and has large holdings in inflation-linked bonds and gold¹. In the team’s own words: “we try not to lose money in any 12-month period and to grow the value of our investors’ wealth over the long haul”². Rob said: “If global risk assets rise sharply, this fund is very unlikely to fully participate. However, Ruffer has demonstrated over many years its ability to weather the inevitable storms that sometimes hit markets.”

Income

BNY Mellon Global Income – BNY Mellon Global Incomeaims to generate income over an annual period together with longer term capital growth through investing in predominantly global equities. The fund has a historic yield of 3.21% and includes pharmaceuticals group Sanofi, IT company Cisco Systems, and PepsiCo among its top holding³. Rob said: “While UK-based investors have, traditionally, looked to domestic companies for income, going global has become increasingly important as a diversifier. The BNY Mellon Global Income fund offers a far broader and deeper set of industries than is available through a UK-oriented equivalent and, at times of market stress, can also prove more defensive because of its international exposure.”

WS Evenlode Global Income – Evenlode Global Income aims to provide income, together with capital growth over the longer term. It has a historic yield of 2.10% and its top holdings include some of the world’s biggest companies, such as Microsoft, Unilever, and Nestle⁴. Rob said: “The team behind WS Evenlode Global Income constructs a portfolio of 25-50 stocks in developed markets, identifying companies with high and growing cashflows with low business risk. These should, in turn, lead to a growing dividend stream and the potential for capital growth as well.”

UK

Vanguard FTSE UK All Share Index Fund –The Vanguard FTSE All Share is an index tracker fund that seeks to emulate the performance of the FTSE All Share in a very cost-effective way, with a net ongoing charge of 0.06%⁵. Among its holdings are the UK’s largest companies – like Shell, AstraZeneca, and Diageo – alongside names from the mid-cap FTSE 250. Rob said: “This tracker fund provides cheap and straightforward exposure to the UK’s biggest companies, as well as the growth potential of its mid-caps. While the FTSE 100 provides you with international exposure, with more than three-quarters of its earnings coming from abroad, the FTSE 250 portion is more domestically focussed.”

Merchants Trust – Merchants Trust is a London-listed investment trust established at the end of the 19^th century. Its portfolio is predominantly made up of UK equities, but the trust also has the ability to invest into some international companies. Top holdings include pharmaceuticals group GSK, Shell, and SSE⁶. Rob said: “Merchants Trust offers an attractive yield of more than 5% as well as prospects for capital growth over the longer term. It is what the Association of Investment Companies refers to as a ‘dividend hero’, with a 41-year track record of dividend increases⁷.” 

Liontrust Special Situations – Liontrust Special Situations aims to achieve long-term capital growth while outperforming the FTSE All Share on a compound growth basis by investing in a concentrated portfolio of UK companies selected by the managers. Top holdings include publishing group RELX, Shell, Unilever, and BP⁸. Rob said: “The managers of Liontrust Special Situations invest in companies they believe have a durable competitive edge. This, in turn, allows them to successfully compete at a higher than average level of profitability for longer than expected, and can lead to positive share price movements. The team approach that Liontrust operates has resulted in a quality-growth bias, which defends in cyclical downturns but also captures the upside of rising markets.” .

Global

GlobalFundsmith Equity Fund – Fundsmith is one of the UK’s most popular funds and aims for long-term growth through a portfolio of high-quality equities. Run by Terry Smith, the fund’s mantra is: ‘buy good companies at a fair price and do nothing’. As such, it avoids investment into sectors perceived as being economically cyclical or which lack strong competitive advantage, such as oil and gas, resources, banking and airlines amongst others. Rob said: “The fund applies a stringent screening process to find high-quality businesses which can offer a high return on invested capital, leading it to companies with an edge that is difficult to replicate, an absence of leverage, high levels of cashflow, resilience to change, and exceptional management teams. The process typically favours sectors like consumer staples, medical supplies, franchisors, and core software companies and, given this narrow list of options, the portfolio is highly concentrated at 20-30 stocks, with very little change.”

iShares Core MSCI World – iShares Core MSCI World offers exposure to a basket of global equities in a very cost-effective manner, with an ongoing charge of just 0.2%⁹. Among its top holdings are the world’s biggest names, such as Apple, Microsoft, and Amazon, but with exposure to companies from a range of countries, ranging from Japan to Ireland. Rob said: “This iShares ETF is very straightforward. If you want cheap, uncomplicated exposure to the biggest names in the world economy, iShares Core MSCI World could be the ETF for you.”

Scottish Mortgage Investment Trust – Scottish Mortgage is one of the UK’s best-known investment trusts and Ballie Gifford’s flagship fund. It focusses on publicly-listed growth-orientated, disruptive companies such as Tesla, Ferrari, and chipmaker ASML, alongside unquoted business like SpaceX¹⁰. Rob said: “After delivering supernormal returns during 2020, Scottish Mortgage suffered as interest rates rose and emerging growth companies fell in value. The trust has maintained a strong commitment to both its approach and process, despite the ups and downs of recent years. Scottish Mortgage’s board has recently been strengthened and its current discount of around -12%¹¹ looks to be a good entry point to this longer term growth trust.”

Overseas and emerging markets

Morgan Stanley Asia Opportunity – Morgan Stanley Asia Opportunity invests in companies across the continent, with the exception of Japan. Nearly 50% of the fund is in China, with around a quarter in India, while the rest is spread among Asia’s smaller nations including South Korea, Singapore, and Indonesia¹². Rob said: “The Morgan Stanley Asia Opportunity fund is not one for the cautious. If you want everything that Asia offers in spades – in other words high potential returns, but the risks that come along with that – this may interest you. China has been a rollercoaster ride over the last few years, and anyone investing may be in store for a wild ride over the year ahead. With around half the fund made up of Chinese equities, Morgan Stanley Asia Opportunity will give you plenty of exposure to whatever comes next in China.”

Adventurous

Polar Capital Technology Trust –Run by Ben Rogoff for many years, Polar Capital Technology invests in a broad range of technology stocks, particularly focussing on the opportunities presented by the rise of artificial intelligence and the changes that are likely to ensue. Among the top holdings are Microsoft, Apple, and Nvidia¹³. Rob said: “Polar Capital Technology starts with a thematic overview of the world, with consideration to real world changes in consumer behaviour, which is then married with the technology lifecycle to target secular themes and pure plays. The resultant portfolio is made up of ‘next generation technology winners’ and share gainers based on the fundamentals of simple business models and strong management teams. The trust has done well, but anyone investing in this trust should be wary of the performance fees attached.”

Schroder Global Energy Transition –Schroder Global Energy Transition aims to offer investors actively managed exposure to companies engaged in the energy transition. Unlike some of its peers, it has no exposure to nuclear energy and fossil fuels – other strategies may tolerate low and decreasing exposure in companies such as Denmark’s Orsted, which has a small legacy oil and gas business. Rob said: “Schroder Global Energy Transition’s lead portfolio manager, Mark Lacey, and his team are dedicated to the sector and have extensive experience within the entire industry, spanning environmental technology and conventional energy. In our discussions with them, we have found them to be experts in their field. The clean energy sector is dominated by small and mid-caps and we feel this fund offers an attractive vehicle to benefit from the changes which are likely to be required over the years ahead.”

– ENDS –

Rob Burgeman and his fellow investment managers at RBC Brewin Dolphin put together bespoke investment portfolios for clients based on their long-term objectives and their attitude to risk. The portfolios will have a mixture of hand-picked holdings in them including third party funds and individual stocks that are researched and recommended by RBC Brewin Dolphin’s in-house research team.

Disclaimers

The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Investment values may increase or decrease as a result of currency fluctuations., Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office: 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 690 8994 69

PRESS INFORMATION

For further information, please contact:

Peter McFarlane peter.mcfarlane@framecreates.co.uk / 07412 739 093

Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343

NOTES TO EDITORS

About RBC Brewin Dolphin

RBC Brewin Dolphin is one of the UK and Ireland’s leading wealth managers and traces its origins back to 1762. With £51.8* billion in assets under management, we offer award-winning, personalised wealth management services from bespoke, discretionary investment management to retirement planning and tax-efficient investing.

Our qualified investment managers and financial planners are based in 33 offices across the UK, Jersey and Republic of Ireland. They are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.

As part of Royal Bank of Canada (RBC), we are now able to draw on the strength of a global financial institution to continue to improve the service we provide to our clients and drive further innovation across our business.

*as at 31^st October 2023.

About RBC

Royal Bank of Canada is a global financial institution with a purpose-driven, principles-led approach to delivering leading performance. Our success comes from the 94,000+ employees who leverage their imaginations and insights to bring our vision, values and strategy to life so we can help our clients thrive and communities prosper. As Canada’s biggest bank and one of the largest in the world, based on market capitalization, we have a diversified business model with a focus on innovation and providing exceptional experiences to our more than 17 million clients in Canada, the U.S. and 27 other countries. Learn more at rbc.com.

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