Each week, a professional investor tells MoneyWeek where he’d put his money now. This week: Andy Parsons, advice team manager at the Share Centre.
The recent market turmoil has frightened off many private investors. But I see this as a great opportunity to top up my individual savings account (Isa) and my self-invested personal pension (Sipp).
The economic backdrop is bleak. America has a vast debt mountain and a slowing economy. The European Central Bank is struggling to deal with a Greek-centred sovereign-debt crisis that has created widespread panic and concern about contagion within the rest of Europe. Here in Britain we are faced with continual downgrades of our economic growth forecasts and continuing questions around the austerity measures set out by the coalition government. Since the start of the year, the FTSE 100 is down around 7%, the S&P 500 has lost 5%, and the MSCI Emerging Markets index has fallen by more than 20%.
Yet, as the experts often point out, you’ll never manage to sell at the top of the market, and you’ll never buy at the bottom – so regular investing over the longer term is the best tried-and-tested approach. Here are three funds that I currently invest in and which I believe will do well in the long-term (ie, in excess of seven to ten years).
The Aberdeen Emerging Markets Fund (tel: 0845-300 2890) gives my portfolio broad coverage of the exciting, albeit potentially volatile, investment arena of these global markets. The fund takes a team-based approach to choosing companies to add to its portfolio, and invests in approximately 50-60 large and mid-cap companies overall. When markets are as volatile as they have been recently, emerging markets are often hit the hardest, as investors seek safer havens – and this time has been no different. However, it’s hard to argue that China, India and Brazil will not become global superpowers over the next ten to 20 years. Add into that mix the emergence of other solid contenders, such as Indonesia, South Africa, South Korea, Turkey, Taiwan, Mexico and Chile, and the story becomes even more compelling.
BlackRock European Dynamic Fund (0800-44 55 22) is managed by Alister Hibbert, who has been at the helm since 2008. His investment mandate allows him to seek out the very best companies across the entire market-cap spectrum from small through to large. Alister’s investment style is blended: he takes account of economic conditions and overlays this view of the macro-economy with the companies he believes are best suited to deliver the returns he thinks are achievable in those conditions.
Which companies does he choose? Those that he believes the market is undervaluing, compared to their earnings potential over the next five years. The portfolio is run on a concentrated basis, with the number of underlying holdings being around 35-65.
L&G UK Alpha Trust (020-3124 3000) is run by the highly impressive Richard Penny who, along with his team, employs a rigorous selection process to identify companies that offer security and strong future growth prospects at good value. The team focuses on companies that have either fallen out of favour with the market or are in the process of restructuring and have the potential for rapid growth.
The fund can invest in any sector, company or UK stockmarket, and it typically holds around 25 to 30 companies. In terms of market capitalisation, there is flexibility to invest across the entire spectrum of stocks – albeit there is often a strong bias towards small and mid-cap firms, which tend to get hit hardest in a general downturn.