He noted that the FTSE has gained 94.7 per cent since the market low achieved in 2009, but that while ‘a rising tide’ has lifted all boats, a ‘more discerning’ approach is needed.
Lowcock added that investors should also look at the dividend yield achieved by funds, as this offers further opportunity for return as well as the 6,865 number achieved this week.
He feels that the market may breach the all-time high level of 6,930 in the near future, but that the ‘final 200 points’ have tended to be the steepest climb for the index to make.
In a climate where the market is rising, there are three funds that Lowcock believes offer the best prospects for private investors, which are described in turn below.
He emphasised that investors should have a ‘balanced’ portfolio.
Old Mutual UK Alpha
‘In 2002, Richard Buxton made the bold claim that the stock market would make little progress over the next decade or so, but he has still performed well. He has achieved this by focusing on a concentrated portfolio of reasonably valued larger and mid-sized companies with good growth potential. This is an approach we like, and it has worked well for Richard Buxton over the long term. Having outperformed in the past during a testing period for stock markets, he is optimistic about the future, and believes the next decade will be far better for investors than the last. I believe this fund could make an excellent choice for investors in search of capital growth.’
Marlborough Multi-Cap Income
‘This fund offers the potential for strong capital appreciation traditionally associated with smaller company investing, with the additional attraction of equity income. Giles Hargreave and his team are among the UK’s best smaller companies investors, according to our analysis. The fund is diversified, with over 100 holdings, and they actively manage the portfolio, adding to their winners and selling those that are failing to add value. The team targets companies yielding at least 2% but with the potential to grow their dividends over time. This fund can add diversification to a portfolio as it invests outside the UK’s largest companies, while offering an attractive yield of 3.76% to income-seeking investors.’
AXA Framlington Managed Balanced
‘Few fund managers can match Richard Peirson’s long-term track record, yet he remains relatively unknown among investors. He tends to invest between 75% and 80% of the portfolio in shares, with the rest in cash and government bonds. The last two asset classes are used to provide balance to the equity holdings and reduce the volatility of the portfolio. Our analysis suggests that good stockpicking has been a key driver of performance, while Richard Peirson’s country and asset allocation decisions have also contributed. His ability to consistently add value has been key to his long-term success, and this fund could suit investors seeking a core investment for their ISA.’