When you’re investing money on behalf of your children it’s natural to focus on the future – their future. After all, they have time on their side and any money invested has longer to work, so you can afford to take a bit more risk than you might do with your own savings.
Taking this approach means you can consider funds that invest in growing parts of the world and exciting innovative companies with huge potential. This brings us neatly to our ideas for this year’s Junior Individual Savings Account (JISA) allocation which embrace these areas in different ways.
Asia is a fascinating area in which to invest. It’s home to innovative companies in countries such as China, South Korea, Singapore, India, and Thailand. Alongside global giants, there are also plenty of young, exciting firms that are growing rapidly, albeit under the radar. However, there are also issues. Many of the countries in Asia struggle with regulatory changes, political instability, and governance issues – so prudence is key.
Manager Anthony Srom adopts a high conviction approach to investing in this Asian equity fund, which is on the Chelsea Core Selection. He uses the breadth of resource within Fidelity to hone his best ideas, comparing what the market says about the share price of a company against his own interpretation of its valuation.
The fund’s largest holding is Taiwan Semiconductor Co Ltd, but the largest overweight position to a stock is the 6% the manager has invested in Focus Media Information, a Chinese company which operates the largest out-of-home advertising network in China, consisting predominantly of digital signage screens*.
As the name suggests this fund is all about finding, and investing in, innovative and disruptive businesses which are changing the world in which we live. The team creates its investment universe by identifying nine innovation themes. The managers then pick the highest quality, fastest growing and best value stocks from within these themes.
The nine themes are: advanced healthcare; artificial intelligence and big data; clean energy and sustainability; cloud computing; internet, media and entertainment; mobile technology and the internet of things; next generation consumer; payments and FinTech; robotics and automation.
Around three-quarters of the fund is currently invested in US-listed companies*. A further 5.9% is in German firms and 3.6% in Swiss companies, with the remainder split between South Korea, France, Taiwan and China*. The largest holding is Apple*.
When investing for a child’s future, what better place to invest than in companies making the world a better place? Artemis Positive Future is a newly launched global equity fund comprising a highly concentrated portfolio of growing companies, with a bias towards mid-caps.
The four-strong team is looking for those firms making a material positive impact on the world through either environmental or social improvements. These companies will sit at the axis of technological and sustainable change, looking to disrupt old economies to capture market share.
Asset allocation of this fund is split between the UN’s Sustainable Development Goals with around 39% currently invested in ideas relating to goal number 4: Good health and well-being*. Other large themes include goal number 9: industry, innovation and infrastructure and goal number 12: responsible consumption and production*.
The emerging markets have long been favoured by longer-term investors willing to accept increased risk in the hope of generating decent returns. These areas of the world are extremely attractive because they provide exposure to exciting, rapidly growing countries and companies. Of course, there is a potential downside. With the prospect of bumper returns comes enhanced risk of failure as emerging areas can suffer economic and political instability.
The aim of the Federated Hermes Global Emerging Market SMID Equity fund is to provide diversified exposure to small and medium-sized companies. These stocks will either be based in one of these global emerging markets or be earning substantial revenue from them. Either way, they will be quality companies with potential.
The search includes gathering evidence of firms’ awareness, vision and strategic planning on environmental, social and governance (ESG) issues, such as climate change and employee wellbeing. SINBON Electronics is one of the fund’s largest stock positions*. This Taiwan-based company provides integrated design and production services for electronic components.
The attraction of investing in small companies is being able to spot future winners before the rest of the market – and then reaping the rewards as the stocks rise in value. That’s certainly the goal of the experienced five-strong management team that run the Liontrust UK Micro Cap fund, which is focused on UK-listed businesses.
Their process is identifying companies with durable competitive advantages that enable them to defy industry competition and sustain a higher-than-average level of profitability. They also want to see evidence that those at the helm of such firms have a financial interest in them doing well. That’s why companies must have at least 3% equity ownership by senior management.
31.5% of the fund is currently invested in technology, with 17.9% in industrials, 11% in financials, and 10.6% in healthcare*. The fund also has exposure to consumer discretionary names, telecommunications, real estate, consumer staples, basic materials, and energy.
Fintel is its largest stock position*. This company helps financial services to operate more effectively by connecting and enabling product providers. Eckoh, a provider of secure payment solutions for contact centres, is another prominent name, as well as Gateley, a legal and professional services group*.
*Source: fund factsheet, 28 February 2022
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice. The mention of specific securities is for illustration purposes only and should not be taken as a recommendation to buy or to sell.