Whats your top fund pick for 2014?

jabbahut40

puk999 wrote: »

Soft-closed at the moment otherwise I'd invest as I agree UK smaller companies have a way to go. Looking at similar funds from other providers...

Yep. As an alternative I also like Cazenove UK Smaller Companies Fund which is also soon to be soft closed but is still open to new investors on many platforms.

Jabba

puk999

Thanks for the Cazenove suggestion :beer:. I had starting investing in Aviva Investors UK Smaller Companies but according to my comparison Cazenove has consistently performed better so might adopt it as it's still open on my platform.

jabbahut40

puk999 wrote: »

Thanks for the Cazenove suggestion :beer:. I had starting investing in Aviva Investors UK Smaller Companies but according to my comparison Cazenove has consistently performed better so might adopt it as it's still open on my platform.

Your welcome. In the same sector I also like Marlborough Special Situations Fund and have a small holding in my S&S ISA. The performance of the manager (Giles Hargreave) whilst not as good as Cazenove in the short term has been excellent (and consistent) over the last 10 years.

http://www.trustnet.com/managers/factsheet/giles-hargreave/utoeic/U/00000021BE/

HTH,

Jabba

Glen_Clark

jabbahut40 wrote: »

Good challenge. Well my portfolio (which is heavily UK biased) has gained significantly in 2013 so the money markets seem to agree?

The money markets seem to agree the value of cash is falling as bankers print it like lunatics. Asset prices (including share prices) rise as the value of cash falls. That doesn't mean the economy is strengthening.

(Unless you believe Gideon Osborne. But how can you trust a politician who devises a scheme to inflate house prices and calls it 'Help to Buy' )

bowlhead99

jabbahut40 wrote: »

Personally I still think UK Smaller companies will continue to grow well in 2014 as the UK economy strengthens and think that Fidelity UK Smaller Companies is the pick of the crop.

I think UK (and US) smaller companies will come off the boil a bit this year. I definitely don't see them compounding last year's gain with a similar performance.

The prices in terms of earnings multiples are obviously quite a bit higher than they were, and while the ratios could continue to rise a bit (and earnings themselves can rise), it's really wishful thinking to suggest even tongue-in-cheek that you'll get the same percentage gain in 2014 as we saw in 2013 on a typical fund in this sector. Some domestic growth is now projected, but this sentiment is reasonably well priced-in and there are few bargains around. Larger fund inflows (based on strong performances) chasing fewer bargains can push or keep prices high but ultimately there is quite a risk that the priced-in UK growth does not happen.

I think sterling may weaken a bit during 2014 and while this is good for our exporters it also means that funds with overseas assets or companies with foreign currency income streams will be better off. Making a sweeping generalisation, the largecaps in the index have better overseas exposure than the smallcaps as they are more externally facing with fingers in more pies. While there are some great smallcap and midcap exporters, smaller domestically focussed firms might generally be importing more expensively and more impacted by domestic growth failing to live up to expectations, than the largecaps whom they outpaced in growth during 2013.

Having said this there is a lot of hot money in largecap FTSE stuff (people chasing big dependable income shares who wouldn't be in equities at all if bond and cash returns were better) and while this might not really recede too much in 2014 specifically (as global QE tapering might be relatively mild and interest rates are not going up any time soon), I don't think that's the best place to be on a 2-3-4 year view really either.

I would probably side with Gadgetmind on some resources funds being well placed for a move towards recovery - if not a particularly good one year rise (I don't really do one-year-prediction challenges), then a general bottoming out and positioning for a longer term rise a few years down the line. This driven by growth in the emerging economies which continue to outpace UK/US while the share prices have not kept up. Partially this is due to EM's earlier strong prices getting a reality check while UK and US went more risk-on over the last year or so.

So, EM funds (not solely EM listed companies, but those with exposure to those places) will do relatively better IMHO than they have of late. Such funds may also benefit from a rebalance away from UK and US which are presumably overweight in some portfolios and clearly in the developed world there is nervousness around tapering being anything other than a really gentle kid-gloves approach. EM are not insulated from this by any stretch of the imagination but I think when current prices are considered they are generally a bit more attractive for a UK investor.

Europe also has potential as another ex-UK location which doesn't have lofty growth projections (so less likely to disappoint to the downside compared to UK smallcap) and the threat of Euro breakup has abated somewhat. Assets in Euros would be worth more if the rate tends more towards 1.10 to the pound than 1.30. I could be wrong on the currency thing but I think GBP will weaken a bit against EUR or USD or both before it strengthens later down the track.

The problem with just saying 'Europe' is that there are pockets of very different economic conditions. In Germany for example a company can borrow a million for a year at under 2% and with inflation at over 1% the real cost of borrowing to invest and expand or simply just finance your ongoing operations is maybe half a percent if you have a nice bank playing ball. In Cyprus it costs you over 6% to borrow the same amount of money and with deflation instead of inflation your real cost is maybe 8% - massively more expensive than Germany. Greece is probably a similar 7-8% with Portugal a bit more sane and Spain quite a lot better than those places but nowhere near Germany, unsurprising given unemployment, growth prospects and perceptions of creditworthiness in Southern Europe.

There could be good bargains, or fully and fairly priced profitable companies, in all of those locations of course. A company facing difficult conditions is not to be avoided if it is cheap just like a strong company should not be avoided for being expensive. But I would be looking at active management for European investments and not just a portfolio of local indexes.

Overall then, EM and Europe and Resources are certainly on my radar more than UK smallcap even though there is momentum behind the latter and no obvious surge coming into resources just yet. But on smallcaps both sides of the pond - at some point when you are having a good ride it is time to get off before you get sick or thrown off even if it means you miss out on some fun.

But ultimately, no sane investor just picks 'the best fund for growth'. They recognise all areas have potential and rebalance between them to maintain an exposure tilted towards their perceptions of potential and acceptable risk which might vary from time to time. Upside income/growth potential and downside protection potential can be found all over the place relative to one 'top pick' popular fund you might read about online - in all the sectors mentioned above plus others such as PE, hedge/AR, infrastructure, real estate etc and fixed income.

It's great to back a star fund over a year and have them return many times their fees, but more realistic to invest widely and simply aim to have a lower than average amount in the sectors you think are going to be dogs - or which don't stack up with the risk/reward you're hoping for.

ColdIron

jabbahut40 wrote: »

Yep. As an alternative I also like Cazenove UK Smaller Companies Fund which is also soon to be soft closed but is still open to new investors on many platforms

Are you sure about this? I thought it was being hard closed to everybody mid Jan 2014?

petersjp

smileaf wrote: »

Yes agree with UK smaller company. Let's hope it will perform similarly to 2013 if not better

Also Japan funds, but i've picked Legg Mason Japan Equity instead of the smaller company just to be on the safe side.

Also I'm interested to hear your thoughts on emerging market funds.

LM Japan Equity is a smaller companies fund, it really needs to be reclassed. Due to it being a growth fund it is alot more volatile then you think. I would not call this being on the safe side

ColdIron wrote: »

Are you sure about this? I thought it was being hard closed to everybody mid Jan 2014?

You are correct it is due to hard close around the 22nd

jabbahut40

ColdIron wrote: »

Are you sure about this? I thought it was being hard closed to everybody mid Jan 2014?

Apols. My mistake. You are correct.

http://www.moneymarketing.co.uk/news-and-analysis/investments/marriages-cazenove-uk-smaller-companies-fund-to-hard-close/2003481.article

jimjames

My fund would be Neptune Russia and Greater Russia. If I'm allowed a secondary pick I also think Aberdeen Latin America could do very well.

Both have been pretty poor performers recently but I think with the focus on Brazil for the World Cup and economic growth resuming both funds will benefit.

In the UK I heard a leading economist predict that growth in 2014 could be between 3-4% which I think is a fair assessment and as per 2013 growth will surprise on the upside compared to official predictions - like the double dip that never was.

woody_56

Hi I am going with any New Frontiers funds.
Black rock comes to mind.