Funds investing in growth stocks, Chinese equities and environmental, social and governance are among those that the Trustnet editorial team is backing in the coming year.
Barring a disaster in the final few days of the year, the team’s 2021 fund picks have had a strong run – something we will go into more detail on in January. However, there is far more uncertainty heading into 2022, with Omicron, inflation and central banks all posing significant risks.
Below, head of editorial Gary Jackson, Trustnet Magazine editor Anthony Luzio, Trustnet editor Jonathan Jones, senior reporter Abraham Darwyne and reporters Eve Maddock-Jones and Tom Aylott give their fund picks for 2022.
It should be noted, however, that these are personal views and should not be taken as investment advice.
Gary Jackson – Trojan Ethical
FE fundinfo’s head of editorial Gary Jackson has taken a cautious approach this year, as the emergence of the Omicron variant and continued inflationary pressures suggest a difficult year ahead. This is in contrast to his risk-on 2021 pick, VT Teviot UK Smaller Companies.
“The pessimist in me can’t see how the bull market can be sustained for yet another year. Therefore, I’m going with a more defensive fund over something more punchy for 2022,” he said.
“For a long time, my go-to option for this was Sebastian Lyon’s Trojan fund but I now use Trojan Ethical in keeping with my responsible investment bias. It has the same aims as the conventional Trojan fund – to protect capital – but avoids areas like armaments and fossil fuels.
“The portfolio is built around quality mega-cap stocks, index-linked bonds, gold and cash, helping it to outperform in past times of market volatility. But added to this is the fact the scenario playing out in markets – inflation surprising on the upside and worries about policy mistakes from central banks – is one that the team at Troy Asset Management has been warning about for many years.
“This gives me greater confidence that this portfolio has a good chance of protecting me during any volatile times that could be coming in 2022.”
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Jonathan Jones – Schroder Global Recovery
After taking a risk on private equity last year, editor Jonathan Jones has stuck with his high-risk, high-reward strategy for 2022, this time choosing to back ‘value’.
“Last year I decided to take a risk, choosing the 3i investment trust. I could pick the same fund again, hoping that it is differentiated enough to weather the expected oncoming economic storm, but instead I will once again take a risk. This time around, I am choosing the Schroder Global Recovery fund,” he said.
“This is a risk because every year someone chooses a ‘value’ fund and looks stupid when we review the picks. This time around it might as well be me.
“However, there are reasons to be optimistic. Firstly, value has finally had a good year, with this fund up 22.4%, a top-quartile performance among its IA Global peers after years of fourth-quartile returns.
“Secondly, the fund’s largest weighting is to financials (18%), which should do well if interest rates rise, while it is very light on technology stocks (4%), which are likely to be hit harder should central banks keep to their word and hike rates.
“If it works I look like a genius. If I am wrong, at least I will be in good company among the copious fund pickers that make this call every year only to be proven incorrect.”
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Anthony Luzio – JPMorgan UK Smaller Companies
Similar to his previous pick, Trustnet Magazine editor Anthony Luzio has gone back to the UK smaller companies sphere, this time choosing a different investment trust to Henderson Smaller Companies.
“Last year I chose the sector in a bid to take advantage of low valuations in the UK and the rebound from the coronavirus crisis. Both of these themes have yet to fully play out and small-cap trusts are ideally placed to benefit from them,” he said.
“However, the JP Morgan trust is about one-third the size of its Henderson peer, allowing it to invest in even smaller companies, which tend to deliver higher growth.
“Whatever happens, I don’t expect this to be the best-performing trust in its sector next year – it doesn’t take a strong view on either growth or value. Yet in a market that should continue to rebound, it looks well placed to deliver double-digit returns – and that’ll do for me.”
Performance of fund vs sector and benchmark over 10yrs
Source: FE Analytics
Abraham Darwyne – Comgest Growth World
Senior reporter Abraham Darwyne has broadened his horizons to the global sector, where he believes that finding companies that can grow their earnings over time will be crucial.
“Some companies’ earnings were turbocharged by the pandemic in 2020 and this momentum continued into 2021. Others struggled during the pandemic, with profits dropping in 2020 but shooting up in 2021 comparatively, making it seem like they had a stellar year. The result is that most companies this year surprised the market with bumper earnings growth numbers,” he said.
“Now that such a high bar has been set, I’m doubtful whether most companies will be able to continue to deliver high earnings growth – I worry many might miss the high expectations set by the market after such a strong year in 2021.
“Throw in the fact that global supply chain issues seem to be sticking around for longer than we thought, and companies are finding themselves offering high wages to retain staff, I think margins will be under pressure.
“This is why I’ve gone with the Comgest Growth World fund, run by Laure Negiar, because her team is laser-focused on finding companies that can consistently grow their earnings, which I think will be more important in 2022 than it has been over the past two years.”
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Eve Maddock-Jones – GS Global Millennials Equity Portfolio
Reporter Eve-Maddock-Jones has also thought globally, but has chosen to invest with a more modern demographic in mind.
“For my third fund pick at Trustnet I have decided to step away from the ESG theme and chose the GS Global Millennials Equity Portfolio. This is still a thematic fund, but one that is focused on my demographic, investing in companies set to benefit from the changing behaviour of the Millennial generation,” she said.
“Millennials refers to anyone born between 1980 and 1999, a generation which entered full time employment post the financial crisis and grew up with wider technological adoption, which has shifted their consumer habits to more online and in alignment with their ethical values.
“The fund holds some of the markets’ biggest companies, including Amazon, Meta Platforms, Alphabet and Nike, all of which have been strong performers over the past decade.
“While the price of these companies can be debated, they are all undeniably strong brands that have pricing power, which should allow them to navigate a changing market environment of rising inflation and interest rates.”
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Tom Aylott – L&G Future World ESG Developed Index
New reporter Tom Aylott, in his first time picking a fund, has gone down the passive route, but has chosen to do so via a sustainable portfolio that he hopes will benefit from the wave of interest in responsible investing.
“With market trackers typically being the most stable option for new investors, I have chosen Legal and General’s Future World ESG fund. Its low ongoing charge of 0.18% makes it an appealing fund for first-time investors,” he said.
“Unlike most tracker funds, the L&G Future World ESG Developed Index tracker has outperformed the IA Global benchmark by 13.2 percentage points and grown 25% over the past year.
“The fund is overweight in US markets (64%) and holds 27% of its assets in the technology and software sectors, such as Microsoft (5.9%) and Apple (5.2%), which should come in handy with many analysts anticipating a spike in technology stocks.”
| Fund | Sector | Fund size | Manager name(s) | Yield | OCF |
| Comgest Growth World | IA Global | £980m | Laure Negiar, Zak Smerczak, Alexandre Narboni, Richard Mercado | N/A | 0.91% |
| GS Global Millennials Equity Portfolio | IA Global | £2,111m | Alexis Deladerrière, Laura Destribats, Nathan Lin | N/A | 1.02% |
| JPMorgan UK Smaller Companies Investment Trust | IT UK Smaller Companies | £298m | Georgina Brittain, Katen Patel | 1.49% | 0.91% |
| L&G Future World ESG Developed Index | IA Global | £877m | Index Fund Management Team | 1.10% | 0.25% |
| Schroder Global Recovery | IA Global | £1,075m | Nick Kirrage, Andrew Lyddon, Simon Adler | 1.35% | 0.56% |
| Trojan Ethical | IA Flexible Investment | £537m | Charlotte Yonge | N/A | 0.77% |