The ‘Stocks and Shares ISA’ is a bit of a misnomer because there are so many different asset classes you can invest in within the wrapper – it’s why we’ve always referred to it as an ‘Investment ISA’ instead.
From commodities to real estate, bonds to infrastructure, there are many areas in addition to equities you can choose from. The ultimate mix in a portfolio will be very personal to your circumstances, risk tolerance and goals.
If you are looking to add a new asset class or top up on a specific area this ISA season here are ten ideas for you.
Commodities come in many forms and this particular fund will only invest in internationally listed metals and mining companies whose revenues are sourced from the sale metals that have strategic importance to the global economy and future macroeconomic trends, including, gold, copper, nickel, silver, and lithium. It’s a great portfolio diversifier that taps into unique investment opportunities, including the transition to a lower carbon world.
Real estate is a much wider asset class today and features areas such as self-storage, student accommodation and care homes as well as offices and warehouses. This fund provides access to a portfolio of real estate securities listed in the UK and Europe and the team is one of the bigger players in this space. The managers use the full range of tools available to them, which enables them to express a wider range of views and better manage risk.
The First Sentier Global Listed Infrastructure fund is a recognised leader in listed infrastructure investment, benefitting from a strong team and a good long-term track record. First Sentier Investors was one of the pioneers in providing access to this asset class, which quickly captured the attention of income-focused investors. This fund is an alternative method of playing the global equity market with a thematic bias and a reasonable yield.
Corporate bonds are looking more attractive today than they have done for the past decade. This fund offers access to this area of the fixed income market. The managers have proven adept at identifying opportunities passed over by other investors and issues that offer superior risk-adjusted returns. The process is risk aware, concentrating on avoiding losers rather than picking big winners, to provide an attractive and stable yield over time.
For fixed income investors willing to take a bit more risk, this is a global high yield bond fund, whose process is driven by individual bond selection, but guided by top-down thematic ideas. Manager Mike Scott is ably supported by a team of internal credit analysts who conduct a rigorous analysis of every potential holding and their ability to meet debt obligations. Mike is very experienced and has an excellent track record in navigating the extra risk in the sector whilst achieving above average returns.
This fund has the flexibility to invest across the whole emerging market bond spectrum. It can invest in both government and corporate bonds, denominated in local currencies or in the US dollar ('hard' currency). The manager uses her vast skill set in this asset class to analyse the macroeconomic environment, and individual companies, to pick what she believes to be the best mix of bonds for this portfolio.
If you are wanting a fixed income fund that covers all bases, this fund is worth a look. It is fully flexible, and the process is all about looking at the bigger picture. Manager Mike Riddell is not afraid to radically alter the fund quickly and this allows him to quickly re-position the portfolio. It is designed to have a low correlation with equities, offering a genuine diversification benefit to investors.
When it comes to equities, going global can sometimes be an option for those not sure which geographical area to pick. Fidelity Global Special Situations is run by Jeremy Podger and is made up predominantly of larger companies. Jeremy uses the breadth of Fidelity's global research team to highlight what he sees as being the best ideas from around the world. Holdings fall into one of three categories, forming a blended portfolio that can deliver consistently through all market conditions.
For those investors preferring emerging markets over developed markets, this fund invests in companies offering products and services to the upwardly mobile, ambitious, and aspirational population centres in emerging markets which account for over 70% of the world’s growth. Preferred areas include the travel, education, healthcare and e-commerce sectors, and there is a focus on firms which either have dominant or first-mover advantage.
Still not sure which asset class to choose? Why not invest in them all via the VT Chelsea Managed Monthly Income fund? Underlying assets may include UK and overseas equities, bonds, gold, and targeted absolute return strategies. Assets such as property, fixed income and infrastructure, which are renowned for their income-paying potential, are also expected to contribute to the fund’s yield.
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.