Investment funds can play an important and lucrative part in an investment portfolio. Whether it be exchange-traded funds (ETFs), mutual funds, or investment trusts, they can provide instant diversification. That’s because they contain multiple stocks, often (but not always) across a wide range of sectors and regions.
They’re also a perfect way to invest in the world’s biggest mega-trends taking shape over the next decade and beyond. Here’s two actively-managed funds that I like the look of.
Sanlam Global Artificial Intelligence Fund
The influence of AI is set to permeate every sector worldwide as its reach continues to accelerate and broaden, creating compelling investment opportunities.
Sanlam Investments
I think that neatly sums up the opportunity of investing in artificial intelligence (AI). But there is an ever-increasing amount of thematic funds and ETFs focused on AI. So why chose Sanlam Global Artificial Intelligence Fund specifically?
Well firstly, I like that it’s not solely oriented around tech. Yes, it has large positions in Alphabet and Microsoft. But it also holds the likes of UnitedHealth Group and Halliburton, the global leader in oilfield equipment and services.
Halliburton is up 65% over the last 12 months. So this diversified approach has certainly proven its worth, given the spectacular fall of many tech stocks over recent months.
Another interesting aspect is that the managers use a proprietary AI platform called ‘Orbit’ to identify companies they might want to invest in. That’s congruent with the fund’s own credo. It’s hard to argue that “AI is set to permeate every sector worldwide”, but not your own sector (i.e., fund management).
I don’t know whether this AI platform really gives the fund managers an edge. But up to September, the performance of the fund has been an 18% annualised return since it was launched in 2017. That’s a very impressive start.
One risk I see moving forwards is the concentrated portfolio. It only contains 36 stocks. That makes it vulnerable if two or three of the largest holdings underperform.
The ongoing fee is 0.5%.
Baillie Gifford Pacific Fund
Asia is the world’s fastest growing region thanks to a rising consumer middle-class and booming exports. That growth is expected to continue for at least the next decade. Baillie Gifford Pacific Fund aims to invest in the greatest companies across Asia-Pacific (excluding Japan).
The fund’s top holdings include India’s Reliance Industries, Taiwan Semiconductor Manufacturing Company, and Samsung. Some 34% of the fund is in China, while around 20% is allocated to India. Vietnam, which is benefiting from a manufacturing exodus from China, is also represented.
Again, I like that the portfolio is diversified across sectors. It has Indonesia-based Merdeka Copper Gold and Chinese oil giant CNOOC.
One big risk I see here is the rising geopolitical tensions between the US and China. Any further deterioration in relations could weaken investor appetite for Chinese stocks, potentially hurting overall fund performance.
Lastly, I view the fund’s ongoing fee of 0.76% as reasonable given the long-term growth opportunity.
If I didn’t already own shares of Pacific Horizon Investment Trust (which is also run by Baillie Gifford and has many of the same holdings), I’d buy this fund. But I am intending to invest in Sanlam Global Artificial Intelligence Fund early in 2023.
