Where the experts are investing this ISA season

Sometimes it can be hard to decide where to invest an ISA allowance, particularly if time is running out and the end of the tax year is fast approaching. To get some ideas, we asked the experts at Chelsea how they have positioned their ISAs this tax year and where they are seeing the best opportunities.

Darius McDermott, managing director

“I've put my money where my mouth is, so to speak, and the bulk of my ISA is currently held in the VT Chelsea Managed Aggressive Growth fund, which currently has about 90% invested in equity funds. Around a third of the portfolio is allocated to the US, 18% to Europe, 13% to the UK, 16% to Asia, 9% to Japan and 6% to emerging markets*.

“So if I was going to add a satellite fund to my holding I would argue that further exposure to emerging market equities could be a good idea for those who are willing to take a higher risk bet.

“One fund I like here is Lazard Emerging Markets, which is managed by James Donald. This fund is arguably punchier than many emerging market equity funds, given it has a value bias – an investing style which has been out of favour for quite some time. However, markets are cyclical and there will be a time when this fund, which focuses on holding global brands of the future, could significantly outperform its growth counterparts.”

Juliet Schooling Latter, research director

“As I'm investing for the long term, I tend to pick equities for my ISA, even when stock markets are volatile. This year, I have chosen a global core fund for my allowance with a little bit of emerging markets on the side.

“50% of my ISA allowance is in T. Rowe Price Global Focused Growth Equity, which is high-conviction and should benefit from global economic growth. 25% of my allowance is in Goldman Sachs India Equity Portfolio, which is an all-weather fund with a process that works throughout the market cycle. The remaining 25% is in Aberdeen Latin American Equity. Interest rates in Brazil have collapsed, inflation is falling, as is the debt and there has been a pick up in growth. Reforms are taking place in Argentina and Mexico is coping well in spite of Trump!”

James Yardley, senior research analyst

“The biggest allocation in my ISA is to the VT Chelsea Managed Cautious Growth fund. Recently, however, I have been topping up my exposure to the VT Chelsea Managed Monthly Income fund. This is because it currently has an attractive yield of 4.5%, which we expect to grow over time. Some of the exposure we have to infrastructure is already yielding 6% and, again, we expect this to increase over the medium-to-long term.

“However, to counterbalance this stream of income with some growth, I think a satellite holding in UK smaller companies may be a good idea.

“My favourite manager in this space is Giles Hargreaves, who runs the Marlborough UK Micro Cap Growth fund alongside Guy Feld. Both managers have decades of experience between them when it comes to investing in small-caps, so they are in a very strong position to unearth some of the smallest, and most under-researched, companies that the UK has to offer. Their performance track record is impressive because, not only have they achieved strong long-term returns, they have done so with minimal nasty downside surprises.”

Ryan Lightfoot-Brown, research analyst

“Around 80% of my ISA is currently in the VT Chelsea Managed Cautious Growth fund because I am planning to cash in my portfolio in the not-too-distant future for a deposit on a house.

“If I were to take on just a little more risk to boost the performance of my portfolio, I would opt for a domestic-facing UK equity fund. This is because this market area has suffered at the hands of Brexit-related uncertainty and, because of widespread market panic, it means skilled managers can select attractive and oversold stocks.

“The UK's medium-sized companies appeal to me and I like F&C UK Mid Cap, which will hold between just 25 and 35 stocks at any one time. This means that it is slightly higher-risk than some other funds in the sector, but his stock selection track record gives me piece of mind – he has even managed to perform well when his value investing style has been out of favour.”

Sam Holder, director

“My family's ISA is held in the VT Chelsea Managed Aggressive Growth fund because I am investing for the long term – I won't need to have any access to my capital for at least 10 years. Not only this, I can withstand higher risk levels because I invest into my ISA on a monthly basis; this means that market dips are actually good for me because it means I can buy more shares.

“An area of the market I particularly like is India, because of the rising middle class and the growing number of working-age citizens, which should boost the country's productivity. I would therefore go with Jupiter India for an additional growth boost. This fund aims to provide long-term growth through a fairly diversified portfolio of around 80 stocks, most of which are directly exposed to the Indian economy, as well as just being domiciled there.”

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 Chelsea staff quoted and do not constitute financial advice.

*Source: fund fact sheet, March 2018

Published on 28/03/2018