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Eight wealth managers on their top fund pick of 2018

Our readers tell us which of their 2018 purchases turned out best

Rob Morgan

Pensions and investment analyst at Charles Stanley

Fidelity American Special Situations had been fighting a strong stylistic headwind prior to this year but that has finally started to wear off, vindicating investors keeping the faith in the manager's contrarian style and active approach.

Angel Agudo targets companies that have gone through a recent period of underperformance and where he believes little value is ascribed to their recovery potential.

His philosophy is that the stock market is inefficient at pricing companies that have gone through a troubled period and are consequently unloved and out of favour.

He constructs a relatively concentrated portfolio of around 50 best ideas across a range of company sizes but with a typical bias towards medium and small sized firms.

The fund has been a great counterweight to more growth or tech-orientated US funds in 2018, or indeed a passive approach in the region centred on the largest firms.

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Rob Morgan

Pensions and investment analyst at Charles Stanley

Fidelity American Special Situations had been fighting a strong stylistic headwind prior to this year but that has finally started to wear off, vindicating investors keeping the faith in the manager's contrarian style and active approach.

Angel Agudo targets companies that have gone through a recent period of underperformance and where he believes little value is ascribed to their recovery potential.

His philosophy is that the stock market is inefficient at pricing companies that have gone through a troubled period and are consequently unloved and out of favour.

He constructs a relatively concentrated portfolio of around 50 best ideas across a range of company sizes but with a typical bias towards medium and small sized firms.

The fund has been a great counterweight to more growth or tech-orientated US funds in 2018, or indeed a passive approach in the region centred on the largest firms.

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Neil Whelan

Investment director at RC Brown

A strong contributor to our clients’ returns to date during 2018 has been the Schroder QEP US Core fund.

The quantitative equity product process uses an institutional approach, based in this case around the S&P 500, to seek consistent outperformance with a low tracking error.

In determining the fund’s constituents, stocks are selected based on a combination of valuation and quality, with a keen focus on risk management. Pricing is also very attractive, with ongoing charges of 0.32%.

We have invested in the fund on our clients’ behalf for a number of years and over this time it has been a consistently positive performer relative to the wider sector.

This has continued during the year to date, with the fund faring well in the recent market volatility, and we would envisage it remaining a core component of clients’ US equity exposure.

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Jon Francis

Senior fund analyst at EFG Asset Management

There has been a lot of debate about the significant outperformance we have seen from ‘growth’ style equity strategies since the financial crisis.

We tend to agree that it has been about as good as it gets for these managers, but have continued to hold onto our highest conviction US equity manager to balance out our other exposures. The Growth team at Morgan Stanley managing the MSIF US Growth and MSIF US Advantage funds have excelled this year and over the last decade.

We have been impressed by the team’s ability to constantly challenge their own views and identify the real risks to business models that have emerged; such as in the consumer staples sector.

The team has been particularly successful in identifying industries at risk of disruption and overvaluation, where other growth managers have been caught out.

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Dan Boardman-Weston

Senior equity analyst at BRI Wealth Management

2018 has been a challenging year for stock markets with volatility finally returning after a prolonged period of calm.

One of our top picks for 2018 was BB Healthcare Trust which invests in a range of global healthcare stocks. The trust is a concentrated best ideas portfolio that adopts a multi-cap approach to investing and has limited overlap with healthcare benchmarks.

This enables the trust to invest in attractive sectors such as Diagnostics, Medical Technology and Healthcare IT. Investing in healthcare is an attractive proposition for us due to the structural growth in the industry caused by an ageing population and the rising costs of healthcare.

BB Healthcare has delivered performance in excess of 20% this year and over 40% since its launch two years ago when we first invested. We remain confident in the long-term prospects of the trust and continue to support it.

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Lauren Wilson

Investments analyst at Mattioli Woods

My top fund pick of 2018 was the Polar Capital Healthcare Opportunities fund.

Healthcare is one of our highest conviction themes due to the powerful fundamentals fuelling growth, such as the ageing population and the wide array of medical needs which remain unmet or poorly addressed.

In addition, investment in healthcare provides access predominantly to the US market while avoiding some of the highly-weighted constituents of the S&P 500.

The Polar Capital Healthcare Opportunities fund is run by a team of industry specialists who have more than 60 years’ combined experience. The fund typically has 40-50 positions and looks for companies involved in all areas of healthcare, from large cap pharma to more specialist medical devices and biotechnology.

The fund’s performance is impressive during a year fraught with volatility. Year to date (as at 26 November), the fund has returned 19.01% in sterling terms in comparison to the IA Specialist sector, which delivered -4.29%, and the MSCI World Healthcare, which achieved 12.54%.

The fund benefitted from a tactical shift into cash at the beginning of the third quarter, with cash reaching a weighting of 25% of the fund at peak. The team was then able to take advantage of excessive weakness in October.

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Damien Lardoux

Head of Impact Investing at EQ Investors

Our top pick of 2018 was the Hermes Impact Opportunities Equity fund. It launched in December 2017, and we were one of the seed investors into this strategy through our EQ Positive Impact Portfolios. As of late November, the fund is outperforming the MSCI All Country index by 7.5% since the turn of the year.

Not only did we support this strategy for its ability to generate strong financial returns, but we also believe that it is a great investment to consider for those who want to make a positive environmental and social impact.

Hermes investment process selects companies that will benefit from meeting the world’s environmental and social challenges. The products or services of these companies will help contribute to one of the 17 UN Sustainable Development Goals, such as clean energy or quality education.

One example is Kroton Educational, a Brazilian company that is broadening access to higher education. It also invests in Orsted, a Danish electric utility company that has shifted its business from fossil fuels to renewable energy.

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Andrew Spence

Investment director at Charlotte Square

My top pick for 2018 was Syncona.

In December 2016, Syncona evolved out of BACIT (Battle Against Cancer Investment Trust) and is now a FTSE 250 investment company – founding and owning significant (often majority) stakes in a portfolio of life science companies.

The share price has doubled since that date (including a 30% return in 2018 to 29 November). Eight of the nine companies in the portfolio were founded by the highly skilled, multi-disciplinary team at Syncona and are pioneers in the field of cell and gene therapy, often in areas related to cancer – with the aim of delivering transformational treatment to patients.

Due to the early nature of many of the underlying companies, valuation is hard. It is estimated that the shares currently trade on a 25% premium to net asset value, at 261p  – in my view, a valuation justified for the high growth nature of this innovative investment company and the excellent management team at Syncona.

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Ian Creswick

Research analyst at Thesis

We have achieved good returns this year from our listed infrastructure and private equity investment trusts, and 3I Infrastructure in particular.

We have been long-term investors since launch in 2007, but 2018 has been a vintage and eventful year. The trust has recovered its premium rating, which was in doubt for a period over Labour Party policy and its cash plans from the sales of Anglian Water and the Finnish electrical distributor Elenia.

After a £425 million special dividend, the share price and rating have barely looked back, with a recent spike on the latest six month results.

These showed good progress from its three largest investments, Infinis (electricity from landfill gas), Wireless Infrastructure Group (communication towers) and Cross London Trains.

The takeover of JLIF has also highlighted that despite some political risk, there is still strong demand for assets with predictable cashflows and inflation protection.

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