Looking for ISA ideas? Here are the 10 best-performing UK funds

The UK is tipped to be the best-performing region in 2022. Jo Groves takes a look at the UK funds delivering the highest returns for ISA investors.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

There’s only a week left to use or lose this tax year’s ISA allowance. However, turbulent markets are challenging for ISA investors trying to balance growth against sheltering their portfolio from losses. So, if you’re looking for alternative investment options for your stocks and shares ISA, UK funds may well be worth considering.

Rory Bateman, head of equities at Schroders, points out that “a sizeable valuation discount has existed between the FTSE 100 and MSCI World indices for close to two decades.” While Sue Noffke from Schroders comments that “UK equities are unloved, undervalued and high yielding; an ideal scenario for stock pickers.”

I’m going to look at why UK stocks are currently out of favour. I’ll also explore the 10 best-performing UK funds over the last year for ISAs.


Why are UK stocks trading at reduced valuations?

The valuation of UK shares has been hit by a triple whammy. The debt issues in Greece and Italy resulted in investors shunning Europe and the UK after the global financial crisis. Brexit was a further shock to stock markets, followed by the impact of the pandemic in the UK.

However, the UK is predicted to be the best-performing region in 2022, according to a recent poll conducted by the Association of Investment Companies. Investment managers from JO Hambro stated they were “utterly bemused by valuations in the UK stock market,” adding that, “rarely, if ever, have the relative attractions of the UK and our fund been brighter than this.”

The record level of mergers and acquisitions is further evidence of the relative under-valuation of UK companies. UK companies attracted substantial interest from US companies in particular in 2021, including CD&R’s purchase of Morrisons. As the New York Times put it, “Private equity firms all want the same thing: British companies.”

Due to their potential upside, I’ve invested around 25% of my ISA in UK funds. They provide a ready-made portfolio of UK shares while reducing the risk of an individual share underperforming.

What are the best-performing UK ISA funds?

UK funds can be categorised into three main sectors:

  1. UK All Companies (around 250 funds)
  2. UK Smaller Companies (50 funds)
  3. UK Equity Income (around 90 funds) – these funds pay an income in addition to capital growth

These are the best-performing UK funds (across all three sectors) over the last year, according to data from Trustnet:



1-year return


Invesco UK Opportunities (UK) Z Acc



MI Downing UK Micro-Cap Growth B Acc



Schroder Income Z Acc



Vanguard FTSE UK Equity Income Index Acc GBP



Schroder Income Maximiser Z Acc






UBS UK Equity Income C Acc



Allianz UK Listed Opportunities C



VT Munro Smart-Beta UK X Acc



Allianz UK Listed Equity Income C Inc


What can we learn from this list? Well, equity income funds account for half of the list, investing in large, established UK companies paying an attractive dividend income. As investor appetite has moved from growth to value shares, they have also enjoyed capital growth in share prices.

However, only one smaller company fund made the grade. Shares in smaller companies typically outperform in rising markets due to higher growth prospects, but the reverse is true in falling markets. Two tracker funds feature in the top 10, offering investors a low-fee option for their ISAs.

Which funds also achieved the highest returns for ISA investors over three years?

1. Invesco UK Opportunities

This fund delivered the highest one-year return of 28%, together with a 3-year return of 40%, according to Trustnet. It has a consistent record of delivering top-quartile returns against its peers over a five-year period as well.

Its three largest holdings are Shell, BP and BAE Systems. The rise in popularity of such defensive shares due to the cost of living squeeze may help to explain the fund’s recent growth.

2. Allianz UK Listed Opportunities

This Allianz fund is another top-quartile performer, with Trustnet reporting a three-year return of 46%. However, as with many UK funds, it made losses of 5%-8% in 2018 and 2020. It’s also focused on defensive companies, with holdings in Shell, British American Tobacco and Capital.

3. Allianz UK Listed Equity Income

This top-performing ISA fund, also from Allianz, achieved a three-year return of 41%, according to Trustnet. In addition to capital growth, it currently offers a 3.5% income yield. 

The fund’s largest holdings are British American Tobacco, Imperial Brands and Shell.


How can you invest in funds?

Using your ISA to invest in funds allows you to benefit from capital gains and tax-free income. My ISA is held with Hargreaves Lansdown, one of our top-rated ISA providers. They offer over 3,000 funds for ISAs and SIPPs.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »