Liontrust Special Situations
A core holding in my ISA is Liontrust Special Situations. This fund is the gift which keeps on giving, having provided a “win-win” formula of consistent outperformance but below average volatility. It has proven particularly adept at beating the market in tougher times. This is no streak of luck, but a reflection of a distinctive approach which the managers – Anthony Cross and Julian Fosh – dub the “Economic Advantage” process. In a nutshell this means identifying companies – large, medium sized or small – that have distinctive characteristics that make them resilient to competition and able to continue to grow throughout the economic cycle. This can be ownership of “intellectual property” (e.g. patents) that rivals cannot replicate, high exposure to recurring and contractual revenue streams earnings, or strong distribution and brands.
TB Evenlode Income
Another favourite is TB Evenlode Income, managed by duo Hugh Yarrow and Ben Peters from a barn conversion in Chipping Norton. They invest in high quality companies with products and services that attract a lot of repeat business from customers and generate an abundance of cash to support both dividends and reinvestment in the business. In particular they like “capital light” businesses, avoiding those which operate in areas that require a lot of physical stuff, like oil rigs and planes, as replacing these through wear and tear is a drain on returns. The approach is a long-term one with major holdings including Unilever, Guinness-owner Diageo and PepsiCo.
Here are two of the funds in my SIPP (self-invested private pension) portfolio:
Royal London Sterling Extra Yield
Basically a fund that invests in more risky bonds issued by companies. I have held the fund since around 2009. During the financial crisis it fell about 40%, as investors fretted about the financial system and doubts grew about whether companies would be able to repay bondholders. However the fund manager never wavered from the belief that the bonds would repay. At one stage the fund yielded 14.5%. It now yields about 6% as the capital has increased. Under a SIPP the income is tax-free, so I still consider 6% a very nice return, even if there is no capital growth.
This might not be a fund to hold if we head back into recession in the UK, but then I’m more optimistic than most on the UK.
Lindsell Train Global Equity
I have held the fund since its launch. Both fund managers are immensely experienced (which means they’re well into their 50s!). And all investors would recognise many of the companies in the portfolio, as the managers look for strong brands and franchises which they believe can weather the storms of changes in economics and politics. One such is Heineken, as the manager said to me, ”we were drinking beer over 1000 years ago – what’s the bet we still will be over the next”.
The fund has had a real tailwind over the last few years as investors have sought out companies which they think have the ability to survive in a lower growth environment. This may not always be the case as markets tend to fixate on different themes at certain times. As ever, as an investor you need patience, something that is generally in short supply with many investors.
Hands down this has to be the most frequently asked question I have ever had. No pearls of wisdom or lottery numbers I’m afraid, and what follows will not be the answer to finding the pot of gold at the end of the rainbow you may be looking for – but for me, they’ve done exactly what they said on the tin.
Liontrust Special Situations
Investment should never be based on past performance, however I’ve always been keen on identifying managers who have had to navigate turbulent markets over time. The management team of the Liontrust Special Situations have done just that. They offer a wealth of experience, knowledge, a proven investment approach and a philosophy which in turn has continued to deliver over time.
Polar Capital Healthcare Opportunities
Another area that has fascinated me for the last several years, and one I have been an advocate of for investing in, is the continual revolutionary developments being found within healthcare. Life expectancy, improved treatments, advancements in technological equipment and healthier lifestyles are all part and parcel of this theme. The Polar Capital Healthcare Opportunities fund has been a core holding for me for some considerable time, providing a breadth of exposure across the various themes already mentioned.
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