With the 2021/22 ISA deadline not far off, I’ve been thinking about investment funds to buy for my Stocks and Shares ISA. Buying funds within this kind of account can be an effective wealth-building strategy, as all capital gains and income are tax-free.

Here, I’m going to highlight two that strike me as great ISA investments now. I think they have the potential to boost my wealth significantly in the future.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A top fund for my ISA

When it comes to top picks for an ISA, it’s hard to look past Fundsmith Equity, in my view. This is a global equity fund with an incredible long-term track record.

Fundsmith is managed by portfolio manager Terry Smith, who has a very strict investment process. Unlike a lot of other portfolio managers, who try to get in and out of hot sectors, Smith sticks to investing in high-quality businesses that have solid growth prospects, are very profitable, have strong balance sheets, and are resilient in the face of change.

This approach seems to work very well. Since the fund was launched back in late 2010, it has generated strong returns when markets have been rising. And it has often minimised falls during periods of market weakness. Overall, it has produced a return of around 17% per year since launch, which is very impressive. However, past performance is not an indicator of future performance, of course.

One issue to consider with Fundsmith is that it tends to avoid highly cyclical areas of the market, such as oil companies and banks. Most of it is invested in three main sectors – consumer staples, technology, and healthcare. This could potentially lead to periods of underperformance at times. This year, for example, oil stocks are flying.

Overall, however, I see Fundsmith as a top fund. I’d be very comfortable investing some of my ISA allowance in it this year.

A high-growth fund

For a more adventurous ISA play, I like the Sanlam Artificial Intelligence fund. This aims to provide long-term capital growth through diversified exposure to one of the global economy’s most important and enduring investment themes – artificial intelligence (AI).

When it comes to powerful long-term growth themes, it’s hard to ignore AI. In the years ahead, it’s likely to have an enormous impact on a wide range of industries, transforming many business models in the process. This is likely to create some lucrative opportunities for investors.

I see this fund from Sanlam Investments as a good way to get exposure to the theme. That’s because it seeks to invest in companies whose engagement with AI is likely to make a material difference to their value. Top holdings at present include the likes of Alphabet, Tesla, and Nvidia, all of which look set to be major players in AI. 

It has a good performance track record since its launch in 2017 (an annualised return of 22%), However, I’d expect it to be volatile going forward as it’s a higher-risk product. And if tech stocks continue to fall on the back of interest rate rises, it could underperform in the short term.

However, as a long-term investor, I’m not concerned about what the fund does in the next six months. I’m looking for gains over a five-to-10 year period. And over that timeframe, I expect this fund to generate good returns for my ISA.

The post 2 top funds to buy for an ISA this year appeared first on The Motley Fool UK.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares in Alphabet (C shares) and Nvidia and has positions in Fundsmith Equity and Sanlam Artificial Intelligence. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and Tesla. 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.

Investing in funds can be a great way to generate passive income. With funds, investors can pick up regular cash payments for doing absolutely nothing.

Here, I’m going to highlight two of my favourite income-focused UK funds. I’d be comfortable buying both today for passive income.

TB Evenlode Income

One of my top picks for passive income is TB Evenlode Income (Class B – Income). This is an under-the-radar fund from West Oxfordshire-based investment firm Evenlode that aims to deliver a healthy, growing dividend stream along with attractive capital returns over the long term. It mainly invests in UK companies but also has a bit of exposure to international companies.

One thing I like about this fund is that the portfolio managers take a ‘Warren Buffett-like’ approach to investing. In other words, they invest in high-quality businesses that have strong competitive advantages. This tends to provide stability. Top holdings at the end of 2021 included Diageo, Unilever, Reckitt Benckiser, and GlaxoSmithKline.

I also like the performance track record here. According to Hargreaves Landown, the fund has delivered total returns (capital gains plus dividends) of about 49% over the last five years. That’s a much higher return than the FTSE 100 has generated (about 26%). It’s worth noting that it has delivered that return with much less volatility than the FTSE 100.

Now, the yield here isn’t super high. Currently, it’s about 2.4%. There are plenty of other income funds that have higher yields than this. However, I’m not too concerned about this due to the fact that total returns have been excellent.

All things considered, I think there’s a lot to like about this fund. Fees are 0.87% per year through Hargreaves Lansdown plus platform fees.

FTF Franklin UK Rising Dividends

Another fund that I rate as a good pick for passive income is the FTF Franklin UK Rising Dividends (Class W – Income). This aims to beat the FTSE All-Share index over a three to five-year period by generating a growing level of income as well as investment growth. Top holdings currently include the likes of AstraZeneca, Unilever, Diageo, and Royal Dutch Shell.

Like Evenlode Income, this fund has delivered solid total returns over the long term. According to Hargreaves Lansdown, it has generated a total return of about 36% over the last five years. Even after fees, that’s much higher than the return from the FTSE 100. It’s achieved this outperformance with a lower level of volatility than the index.

At present, the yield here is around 2.8%. I see that as a very healthy yield in today’s low-interest-rate environment. It’s higher than I could get from a savings account. Of course, yields from funds are never guaranteed. If stocks in the portfolio reduced their dividends, investors would mostly likely receive a lower yield. And the risk level is much higher than a savings account.

Overall, however, I see a lot of potential here from a passive income perspective. Fees are 0.54% through Hargreaves Lansdown, plus platform fees.

The post 2 UK investment funds to buy in 2022 for passive income appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Diageo, Hargreaves Lansdown, Reckitt, and Unilever. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and Unilever. 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.

Buying into actively-managed investment funds can be a great way to build wealth over the long run. With these investments  your funds are pooled together with the money from other investors and then spread over many different stocks by a professional manager. The end result is diversified exposure to the stock market at a relatively low cost.

Here, I’m going to highlight nine top funds I like for 2022 and beyond. All of these products have good performance track records so I’d be comfortable buying them for my own investment portfolio today. 

My top UK equity funds for 2022  

Starting with UK-focused products, one of my top picks is Royal London Sustainable Leaders. This fund has an ethical focus (it aims to invest in companies making a positive contribution to society) and I see it as a great ‘core holding’. At the end of October, top holdings included Prudential, Experian, and Astrazeneca. 

In terms of performance, this fund delivered a return of 12.1% per year for the five years to the end of October. By contrast, the FTSE All-Share index returned 4.6% per year over that period. This shows that long-term investors like myself can invest responsibly without having to sacrifice financial returns. 

In the UK growth fund space, I like Slater Growth. This is run by Mark Slater, who is considered to be one of the UK’s top stock pickers. Slater’s aim is to invest in shares which he believes are undervalued and that have the potential for a significant rerating.

At the end of November, top holdings included Future, Prudential, and Next Fifteen. Zooming in on performance, the long-term returns here have been excellent. Over the five years to the end of November, the fund delivered a return of around 106%. 

In the UK small-cap space I like ASI Smaller Companies. This fund aims to generate long-term growth by employing a strategy that combines growth, quality, and momentum approaches to investing. At the end of last month, top holdings included Kainos, Gamma Communications, and Impax Asset Management. Over the five years to the end of November, it returned about 16.5% per year after fees, which was well ahead of its benchmark. 

Finally, in the UK equity income space, I like the TB Evenlode Income fund. This is an income-focused fund that predominantly invests in high-quality UK businesses (it’s allowed to invest a small proportion of its capital internationally). Top holdings at the end of November included Unilever, Diageo, and Sage. Over the five-year period to the end of November, it returned 55%, which is very good for an equity income fund. In terms of income, the dividend yield here is currently about 2.4%. 

Global equity funds for 2022 

Moving on to global equity funds, one of my top picks for 2022 is Fundsmith. This fund, which is managed by Terry Smith, is one of the most popular equity funds in the UK, and it’s not hard to see why. Since its launch in late 2010, it has delivered a return of about 18% per year, which is phenomenal. 

What I like about Fundsmith is that Smith has a very simple approach to investing. All he does is pick great companies and hold them for the long run. It’s a straightforward, Warren Buffett-like approach to investing that works. At 30 November, top holdings included Microsoft, Intuit, and Estée Lauder. 

Another global equity fund I hold in high regard is Blue Whale Growth. This is a concentrated growth-focused fund run by Stephen Yiu. This product was only launched in 2017 so it doesn’t have the kind of long-term track record that Fundsmith has. However, since its launch, it has delivered very strong returns (20.8% per year to the end of November), outperforming most funds in its category. 

Like Smith, Yiu has a straightforward approach to investing. He simply invests in high-quality growth companies that are trading at attractive valuations. Looking at the performance here, this approach certainly seems to work for the portfolio manager. At the end of November, top holdings included Microsoft, Alphabet, and Adobe. 

US equities 

Turning to the US, which has been a popular destination for UK investors’ capital in recent years, I like Baillie Gifford American. This is a growth-focused product with an excellent performance track record. Over the five years to the end of November, it generated a return of 34% per year. Top holdings at the end last month included Shopify, Tesla, and Moderna. 

Technology funds for 2022 

Finally, I think it’s worth highlighting some top technology funds. After all, we are in the midst of a tech revolution.

For a core technology holding, I like Fidelity Global Technology. This is a fairly vanilla tech fund that contains exposure to a lot of the big tech names including Microsoft, Apple, and Amazon. Performance here recently has been solid. Over the last five years, it has returned about 27% per year. 

For a more niche technology play, I like Sanlam Artificial Intelligence. This is focused on companies that are active in the artificial intelligence (AI) space. At the end of October, top holdings included Alphabet, Upstart, and Keyence. It’s worth pointing out that this fund was only launched in 2017, so it doesn’t have a long-term track record. However, performance since inception has been very strong (28% per year to the end of October). 

The risks of investing in funds

It’s worth pointing out that all of these funds have their own unique risks. For example, the UK funds could underperform if the country’s economy struggles.

Similarly, the tech funds could underperform if these stocks fall out of favour. Some of the funds, such as Fundsmith and Blue Whale, are also quite concentrated in nature, meaning they have a higher level of stock-specific risk relative to more diversified funds. As always, past performance is not an indicator of future returns.

I’m comfortable with these risks however. I think all of these funds could play a valuable role in my diversified portfolio in 2022.

The post 9 top investment funds for 2022 appeared first on The Motley Fool UK.

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• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns Alphabet (C shares), Amazon, Apple, Hargreaves Lansdown, Diageo, Experian, Gamma Communications, Kainos, Microsoft, Prudential, Sage Group, Shopify, Unilever, and Upstart Holdings, Inc and has positions in Fundsmith Equity, Blue Whale, and Samlam Artificial Intelligence. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Apple, Diageo, Experian, Gamma Communications, Kainos, Hargreaves Lansdown, Microsoft, Next Fifteen Communications, Prudential, Sage Group, Shopify, Unilever, and Upstart Holdings, Inc. 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.

Here, I’m going to highlight the five funds I currently own in my ISAs and SIPP (Self-Invested Personal Pension). These products are not going to be suitable for all investors. However, they match my goals (long-term growth) and risk tolerance.

Fundsmith Equity

My largest fund holding across my ISAs and SIPPs is currently Fundsmith Equity. This is a global equity product managed by Terry Smith. It has a fantastic record – since its inception in 2010 it has returned about 18% per year. Past performance is not indicative of future results though.

The reason I like this fund is that Smith has a similar style to that of Warren Buffett. He simply invests in high-quality businesses (at a reasonable price) and holds them for the long term. I think this is a great approach to investing.

This fund is quite concentrated – it only holds around 30 stocks. This adds risk. However, I’m comfortable with this approach. I see Fundsmith as a great core holding.

Blue Whale Growth

My second-largest fund holding is currently Blue Whale Growth. This is a global equity product that is managed by Stephen Yiu. Like Smith, Yiu invests in high-quality businesses. However, he’s a little more active in his approach.

This fund doesn’t have a long-term track record. It was only launched in 2017. Yet since then, it has delivered excellent returns. Over the last three years it has returned about 75%. There’s no guarantee it will continue to deliver high returns. However, I like Yiu’s investment style, so I’m willing to back him.

Lindsell Train Global Equity

My third-largest fund holding is Lindsell Train Global Equity. This is managed by Nick Train and Michael Lindsell, who also focus on high-quality companies. It has a great long-term track record having returned about 350% since its launch in 2011 (versus about 200% for the MSCI World index).

This fund – which is also quite concentrated – has underperformed a little in recent years. Last year, it returned 11.7% versus 12.3% for its benchmark. I’m willing to stick with it, however. I like the investment approach and the types of companies the fund invests in.

Threadneedle European Select

My fourth-largest holding, the Threadneedle European Select fund, offers something different. This product is purely focused on Europe.

Europe is often neglected by UK investors. That’s a shame, in my view, because there are some world-class businesses listed in the region. This particular fund currently owns some fantastic companies such as Nestlé, Pernod-Ricard, and L’Oréal.

The fund has been a solid performer for me. Over the last five years, it has returned about 82%. The pure focus on Europe adds risk, but I see it as a good portfolio diversifier.

Polar Capital Global Technology

Finally, I have a smaller position in the Polar Capital Global Technology fund. This product is focused on the technology sector.

This fund is higher-risk than the other ones because it’s focused on one sector. If the technology sector crashes in the future (which it often does), this fund will most likely underperform.

However, I’m bullish on the tech sector. In the long run, I think it can potentially boost my returns.

The post The 5 funds I own in my ISA and SIPP in 2021 appeared first on The Motley Fool UK.

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• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Hargreaves Lansdown and has positions in Fundsmith Equity, Lindsell Train Global Equity, Blue Whale Growth, Threadneedle European Select, and Polar Capital Global Technology. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

Here, I’m going to highlight seven top funds I like for 2021 and beyond. All of these have smashed the market in recent years and I think they’ve a good chance of delivering strong long-term returns for investors going forward.

Top UK equity funds for 2021

Starting with UK-focused funds, one of my top picks in this area is Lindsell Train UK Equity. This fund, which is run by star manager Nick Train, has been a consistently good performer. Over the last five years, it has returned about 60% versus 27% for a FTSE 100 tracker.

Train invests in a similar way to Warren Buffett, focusing on companies that are highly profitable and that have strong competitive advantages. It’s a good approach, in my view. Top holdings include Unilever, Diageo, and Relx.

Another fund that’s run with a Buffett-like focus is CFP SDL UK Buffettology. The difference between this fund and Lindsell Train however, is it has more exposure to smaller companies. Top holdings here, for example, currently include Games Workshop and Liontrust Asset Management. This has been an excellent performer for years. Over the last five years, it’s returned about 84%.

In the sustainable investing space, I like Royal London Sustainable Leaders. This fund’s aim is to achieve capital growth over the medium term. It does this by investing at least 80% of its capital in the shares of UK companies listed on the London Stock Exchange deemed to make a positive contribution to society. It’s shown that investors can invest responsibly without having to sacrifice returns. Over the last five years it’s up about 65%. Top holdings include AstraZeneca, Experian, and the London Stock Exchange.

Finally, in the equity income area, my favourite fund for 2021 is TB Evenlode Income. It currently offers a yield of around 3%. This is another fund that focuses on high-quality businesses. Top holdings currently include Relx, Unilever, and Diageo. Over the last five years it’s returned nearly 60% – beating most UK equity income funds comfortably.

Global equity funds

In the global equity space, I like Blue Whale Growth. I’ve named it as my top fund for 2021. This is a concentrated growth fund run by Stephen Yiu. I like Yiu’s approach – he looks for high-quality growth companies at a reasonable valuation. Top holdings currently include Microsoft, Visa, and Adobe. It’s returned about 70% over the last three years.

Of course, I can’t discuss top funds and not mention Fundsmith. This fund, which has been a top performer for over a decade now, has turned £10k into more than £50k since its launch in 2010. It’s run by Terry Smith, who also invests like Buffett. Top holdings currently include Microsoft, PayPal, and Facebook.

Finally, for a more adventurous play, I like Baillie Gifford Global Discovery. This is riskier than Blue Whale and Fundsmith. It currently holds stocks such as Tesla, Ocado, and Teladoc Health. However, it’s also been a great performer. Over the last five years it’s returned 240%. I think this fund could be worth a small investment as a high-risk, high-reward play.

The post 7 top funds I’d invest in for 2021 appeared first on The Motley Fool UK.

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• A SIPP seems to offer investors free money – is there a catch?
• Here’s what £10,000 invested in Greggs shares a year ago’s worth now
• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Unilever, Diageo, Microsoft, PayPal, Teladoc Health, Experian and has positions in Fundsmith and Blue Whale Growth. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, Microsoft, PayPal Holdings, Tesla, and Visa. The Motley Fool UK has recommended Diageo, Experian, RELX, and Unilever and recommends the following options: long January 2022 $75 calls on PayPal Holdings. 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.

Personally, my top fund pick for 2021 is Blue Whale Growth, which is managed by Stephen Yiu. This is a fund that has performed very well for me since I first invested in it back in 2019 and I expect it to continue doing well going forward. Here’s a look at why I’m bullish.

Blue Whale Growth: a high-conviction approach

Blue Whale is a global equity fund that invests with a high-conviction approach. This means that it doesn’t invest in a whole lot of companies. Instead, it only invests in around 30 stocks – all of which Yiu believes have strong growth potential.

What I like about Yiu’s approach is that there’s a strong focus on ‘quality’. Like Terry Smith and Nick Train, Yiu looks for companies that are highly profitable and financially strong, that have competitive advantages and strong growth prospects. He avoids sectors that are unpredictable such as oil and mining. He also steers clear of banks as he believes their balance sheets are too complex.

Having closely monitored this fund for over 18 months now, I can say that I really like the kinds of stocks Yiu invests in. They tend to have strong growth potential due to structural trends, yet are not high-risk. At present, there are some really great names in the Blue Whale portfolio. The top 10 holdings include the likes of Microsoft, Adobe, Amazon, and PayPal. These are all companies I’m bullish on.

Another thing I like about this fund is that Yiu and his small team of analysts spend a significant time researching every stock they hold. For each stock, they build valuation models to get a better idea of the intrinsic value of each company. This means there’s a strong focus on value as well as growth. In other words, it’s a growth-at-a-reasonable-price approach. Yiu is not afraid to sell stocks that look overvalued. For example, this year, he took some profits on Amazon at one stage.

Performance: this fund is beating Fundsmith

What’s really impressive about Blue Whale is the performance. This year, the fund has done really well, returning 23.6% between the start of the year and the end of November. It has beaten rivals Fundsmith (16.3%) and Lindsell Train Global Equity (7.4%) by a wide margin.

Meanwhile, according to Hargreaves Lansdown, over the last three years (to 21 December), the fund has returned a very impressive 72%. By contrast, Fundsmith has returned 52% while Lindsell Train has returned 47%.

My top fund for 2021

Of course, there are risks to consider here.

There’s a strong bias towards the technology sector at the moment. But I’m comfortable with that. After all, we are in the middle of a digital revolution.

The concentrated nature of the portfolio also adds a higher level of stock-specific risk.

Overall however, I think Blue Whale Growth is a very attractive fund. I’ve made it one of my largest fund holdings and I plan to keep adding to it in 2021.

The post Blue Whale Growth: my top fund for 2021 appeared first on The Motley Fool UK.

More reading

• A SIPP seems to offer investors free money – is there a catch?
• Here’s what £10,000 invested in Greggs shares a year ago’s worth now
• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Amazon, PayPal, Hargreaves Lansdown, and Microsoft and has positions in Blue Whale Growth, Fundsmith and Lindsell Train Global Equity. . John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Microsoft, and PayPal Holdings. The Motley Fool UK has recommended Hargreaves Lansdown and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. 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.

With that in mind, I want to highlight the three UK equity funds on the Hargreaves Lansdown platform (from the UK All Companies sector) that have delivered the highest returns to investors over the last five years. All three of these funds have outperformed broad market indexes, such as the FTSE 100 and the FTSE All-Share, by a wide margin.

Top fund performance

At the top of the list is the Chelverton UK Equity Growth fund. It’s returned 85% over the five-year period, which is an excellent performance. By contrast, the FTSE 100 index has returned a total of -3%, while the FTSE 100 All-Share has delivered a return of about -2%.

One reason Chelverton has outperformed is that it has a focus on small- and medium-sized UK companies outside the FTSE 100. These types of companies tend to grow faster than large-cap businesses. It also focuses on high-quality companies that have competitive advantages and are cash generative. This approach reduces the risk of big losses. According to Hargreaves Lansdown, the top holdings are currently Future, Volution Group, Elementis, Dotdigital, and SDL.

Overall, this fund has delivered very impressive returns since its launch in October 2014. I see it as a solid choice for growth investors with a higher tolerance for risk. Fees are 0.94% per year through Hargreaves Lansdown, plus platform fees.

Warren Buffett-like approach

In second place is the CFP SDL UK Buffettology fund. This has delivered a return of 66% over the last half-decade. That equates to an annualised return of about 10.7%, which is a top performance given the circumstances.

Like the Chelverton, Buffettology isn’t your average UK equity fund. Here, portfolio manager Keith Ashworth-Lord invests with a Warren Buffett-like approach, focusing on companies that have strong competitive advantages. He also focuses heavily on the small-cap area of the market, although the fund does hold some FTSE 100 giants. Top holdings, according to Hargreaves, are currently Games Workshop Group, Liontrust Asset Management, Dart Group, London Stock Exchange and AB Dynamics.

For risk-tolerant UK growth investors, I see this fund as another solid pick. Fees are 1.19% through Hargreaves.

Recovery situations

Finally, in third place, is the Slater Recovery fund, which is managed by Mark Slater. In terms of performance, this fund has delivered a total return of 53% over the last five years.

This is another unique UK equity fund. Here, the portfolio’s core is invested in high-quality companies with low valuations relative to earnings growth. However, the fund also invests in recovery situations, and stocks trading at a discount to their asset value.

Specifically, Slater likes companies with strong balance sheets, powerful competitive positions, and high returns on capital. Current top holdings are Future, Codemasters, Alliance Pharma, IWG, and Tesco, according to Hargreaves Lansdown.

Given its unique approach, I think this fund could be a good way to add diversification to a portfolio. Ongoing fees are 0.83% per year through Hargreaves Lansdown.

The post Fund performance: what were the best-performing UK equity funds over the last 5 years? appeared first on The Motley Fool UK.

More reading

• A SIPP seems to offer investors free money – is there a catch?
• Here’s what £10,000 invested in Greggs shares a year ago’s worth now
• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Hargreaves Lansdown and DotDigital Group. The Motley Fool UK has recommended AB Dynamics, Alliance Pharma, dotDigital Group, Elementis, Hargreaves Lansdown, and Tesco. 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.

Today, I’ll be analysing the performance of these two funds over the first quarter of 2020. Let’s take a look at how they performed in the recent stock market crash.

Fundsmith and Lindsell Train outperformed 

According to their most recent factsheets, Fundsmith delivered a return of -7.9% for the first three months of 2020, while Lindsell Train Global Equity delivered a return of -11%.

Are these good returns given the market conditions? You bet they are.

In comparison, the MSCI World index that many global equity funds are benchmarked against returned -15.7%. Meanwhile, the FTSE 100 index, to which many UK investors pay close attention, returned -23.8%. The S&P 500 index returned -19.6% (in USD terms). So, both funds outperformed significantly over the quarter.

Looking at performance in March, when volatility reached the highest level since the Global Financial Crisis in 2008, Fundsmith returned -3.7% for the month. Meanwhile Lindsell Train Global Equity returned -3.3%. By contrast, the MSCI World index returned -10.6%. And the FTSE 100 and the S&P 500 returned -13.4%, and -12.4% respectively. So again, the two funds outperformed by a wide margin.

Overall, both of these funds held up very well in the stock market crash, protecting investors from big losses.

What drove this outperformance?

Why did these funds outperform the wider market? I put it down to the fact that they both focus on high-quality businesses.

You see, their portfolio managers, Terry Smith (Fundsmith) and Nick Train (Lindsell Train Global Equity), have very strict criteria when it comes to picking stocks.

Instead of owning hundreds of stocks like some money managers do, these portfolio managers only invest in a small number of truly exceptional companies. Specifically, they tend to invest in companies that have robust competitive advantages, strong balance sheets, dependable earnings, and the potential for long-term growth.

Some examples of the kinds of stocks they own include:

• Unilever, whose everyday goods are still being used by millions of people globally during the coronavirus shutdown.

• Diageo, whose vodka, gin and whisky is still being consumed during the shutdown.

• Sage, the cloud-based accounting solutions specialist that is benefitting as businesses increasingly become more digital.

• Microsoft, whose leading software products are still being used by millions of workers remotely.

• PayPal, which is benefiting from an increase in online shopping.

Ultimately, this high-quality approach to investing appears to generate great returns when stock markets are rising, as well as protection when markets are falling.

I think that’s something to keep in mind if you’re putting together your own portfolio of stocks and funds in the current environment.

The post Here’s how Fundsmith and Lindsell Train Global Equity performed in the recent stock market crash appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Unilever, Diageo, Sage, Microsoft, and PayPal and has positions in the Fundsmith Equity fund and the Lindsell Train Global Equity fund. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Microsoft, PayPal Holdings, and Unilever. The Motley Fool UK has recommended Diageo and Sage Group and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. 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.

Fast forward to today, and Blue Whale Growth is still delivering a top performance for its investors. Here’s a look at how this under-the-radar global equity fund has performed recently. 

A top-performing fund 

When I covered Blue Whale Growth last year, I highlighted the fact it was comfortably outperforming both the FTSE 100 and the FTSE All-World indexes. Today, the fund – which now has assets of nearly £250m – is still beating these indexes.

For example, for the three-month period to the end of March (which included the coronavirus market crash), Blue Whale Growth delivered a return of -8%. By contrast, the FTSE 100 returned -24% and the FTSE All-World -21%. That’s a significant outperformance. And looking at its performance for the whole of 2019, Blue Whale returned an excellent return of 28%, versus 17% for the FTSE 100 and 27% for the FTSE All-World.

Overall, Blue Whale has impressed since its launch in September 2017. Of the 285 funds in the Investment Association’s ‘Global’ category, it has been the third-best performer.

Investment approach

In terms of why this fund has outperformed the FTSE 100 by such a wide margin, I put it down to two reasons.

Firstly, it’s a global equity product. This means portfolio manager Stephen Yiu has access to investment opportunities that can’t be found here in the UK. 

Secondly, Yiu is a high-conviction manager. This means that instead of buying hundreds of stocks for the portfolio, he only invests in around 25-35 companies he believes can generate exceptional returns for investors.

Specifically, Yiu looks for companies that have the ability to grow and improve profitability over the long term, don’t face structural or imminent cyclical issues, and trade at attractive valuations. 

World-class companies

The result of this approach is that the fund contains leading businesses such as:

• Amazon, which is benefitting from the shift towards online shopping

• Visa, which is also benefiting as we increasingly shop online

• Microsoft, which is now a key player in cloud technology and artificial intelligence

• Adobe, which has a market share of more than 50% in the digital content creation software market

• Unilever, which is benefiting from rising levels of wealth in emerging markets

All of these companies have outperformed the FTSE 100 by a wide margin this year so it’s no surprise the fund has outperformed as well.

A top global equity fund

Overall, I continue to believe there’s a lot to like about Blue Whale Growth fund, despite the fact it doesn’t have a long-term performance track record. 

It’s not going to be suitable for all investors. However, for risk-tolerant investors with a long-term investment horizon, I think it’s a good choice for global equity exposure.

The post I like this under-the-radar growth fund that’s still smashing the FTSE 100 appeared first on The Motley Fool UK.

More reading

• A SIPP seems to offer investors free money – is there a catch?
• Here’s what £10,000 invested in Greggs shares a year ago’s worth now
• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Unilever and Microsoft and has a position in Blue Whale Growth. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Microsoft, Unilever, and Visa and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. 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.

Franklin UK Rising Dividends

In order to take advantage of recent FTSE 100 weakness, I’ve added to my position in the Franklin UK Rising Dividends fund. This is an under-the-radar fund that has a focus on high-quality UK dividend payers. It aims to provide both capital growth and a rising level of income over time. It has a solid performance track record with a five-year return of about 27% versus around 14% for a FTSE 100 index tracker. And it is available on the Hargreaves Lansdown platform with a very reasonable annual fee of just 0.55%.

Top holdings in this fund currently include Unilever, Royal Dutch Shell, Diageo, Relx and GlaxoSmithKline. All of them have fallen in the recent stock market decline. So, by putting money into this fund now, I’m effectively increasing my exposure to these FTSE 100 names at lower prices.

Fundsmith Equity

I’ve also been adding to my favourite investment fund Fundsmith in recent weeks. This is a concentrated global equity fund that focuses on high-quality, resilient companies. It’s managed by portfolio manager Terry Smith. He has a phenomenal long-term performance track record (Fundsmith has returned approximately 113% over the last five years). Top holdings include Microsoft, Philip Morris, PayPal, Novo Nordisk and Facebook.

Interestingly, Terry Smith recently said he is “pretty relaxed” about the impact of the coronavirus on his portfolio. He modelled the performance of the portfolio during the Global Financial Crisis. And he believes that Fundsmith should fall less than the broader market then rebound more quickly in the event of a market crash. This leads me to believe that boosting my exposure here is a sensible move.

Lindsell Train Global Equity

Finally, I’ve also put some money into another favourite of mine, Lindsell Train Global Equity. This is run by portfolio manager Nick Train. Like Fundsmith, it is a global equity fund that has a focus on high-quality, robust companies. And it has an excellent long-term performance track record (five-year return of approximately 107%). Top holdings currently include the likes of Unilever, Heineken, Diageo, London Stock Exchange and Nintendo. Given its the track record, I believe investing a little more money into it now, while stocks are down, is a sound long-term move.

Of course, global stock markets could continue to fall further in the coming days and weeks. No one knows how long this volatility will last. For this reason, I’m drip-feeding money into my funds, bit-by-bit, in order to average out my entry points.

The post 3 funds I’ve bought as the stock market has crashed appeared first on The Motley Fool UK.

More reading

• A SIPP seems to offer investors free money – is there a catch?
• Here’s what £10,000 invested in Greggs shares a year ago’s worth now
• Recent BT share price performance is jaw-dropping but can it continue?
• Is the stock market correction a once-in-a-decade chance to target a million-pound SIPP?
• How to target a £10k annual income from just one year’s £20,000 Stocks and Shares ISA allowance

Edward Sheldon owns shares in Hargreaves Lansdown, Unilever, Diageo, GlaxoSmithKline, Microsoft and Royal Dutch Shell, and has positions in Franklin UK Rising Dividends fund, Fundsmith Equity, and Lindsell Train Global Equity. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, GlaxoSmithKline, Microsoft, PayPal Holdings, and Unilever. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and RELX and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. 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.