Ten fund ideas to stick in your stocking: India and the US were this year's best performers… but what do investment experts pick for 2022?

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India topped the performance charts in 2021, with the average fund in the Investment Association’s India/Indian Subcontinent sector returning 26.7 per cent by mid-December.

The country’s stock market has been buoyed by strong growth, relatively cheap valuations and a gradual improvement in its experience of the Covid-19 pandemic. 

North America and Commodity/Natural Resources funds were the next best performers, returning an average of 25.1 per cent and 22 per cent, FE fundinfo data collated by Chelsea Financial Services shows.

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THE TOP 20 BEST PERFORMING FUNDS IN 2021 

Fund Return (1/1/2021 – 16/12/2021) 
Alquity Indian Subcontinent 45.12
TB Guinness Global Energy  43.53 
Guinness Global Money Managers  42.50 
Fiera Capital Europe Magna New Frontiers  39.57 
T. Rowe Price Frontier Market Equity  38.90 
Jupiter India  34.49 
VT De Lisle America  33.98 
Brown Advisory US Sustainable Growth 33.53 
L&G Global Technology Index Trust  33.30 
Dodge & Cox US Stock  32.89 

In terms of individual funds, the strong performance of Indian stocks helped drive Alquity Indian Subcontinent to become 2021’s best performer, with a return of 45.1 per cent.

It was followed by TB Guinness Global Energy and Guinness Global Money Managers with gains of 43.5 per cent and 42.5 per cent respectively.

However, data from investing platform AJ Bell suggests that British investors didn’t always back the winners this year, as not one of the platform’s 10 most popular funds were among the top 20 best performers of 2021.

AJ Bell investors’ most popular fund investment in 2021 was Fundsmith Equity, followed by Fidelity Index World, Baillie Gifford American, Baillie Gifford Positive Change and Fidelity Global Special Situations.

But what funds are well positioned to outperform in 2022 and where should Britons invest?

Here, some experts suggest their top fund picks for the year ahead.

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Ben Yearsley, investment director at Shore Financial Planning, says:

Matthews China Smaller Companies has had a lacklustre 2021 growing about 4 per cent, however considering the shenanigans from Beijing I think that’s pretty decent return.

‘It is well placed to capture the affluent and growing middle classes in China. Healthcare and technology are two of the largest sector weights.

‘Another one to look at is Fidelity Asia Pacific Opportunities managed by Anthony Srom. He’s a contrarian investor who runs a very tight portfolio of around 25-35 companies.

‘The fund typically has a bias towards growth companies despite the contrarian nature as the manager is keen to buy into ideas before others have noticed them.

‘I’m a major fan of Asia as a long-term investment theme and it should be due a better covid recovery bounce next year.

‘I will mention the UK again, as there are many factors at play making the UK an interesting market to watch again and I will stick with my suggestion from last year JO Hambro UK Dynamic. 

‘The fund has a mix of special situations and recovery plays and is likely to be a beneficiary of a recovering UK economy, increased dividends and buybacks and M&A.’

Managing director of Bestinvest, Jason Hollands, says:

‘The UK market continues to trade at a significant discount to global equities overall – an opportunity not lost on international private equity firms who have been highly active bidders this year.

‘I expect to see this continue in 2022. While the UK market’s lack of major tech companies has been its Achilles Heel in recent years, what it does have in abundance is exposure to financials, industrials and commodities, the sorts of sectors that prove resilient in an inflationary environment and as interest rates rise.

‘I therefore think investors who’ve ignored the UK in recent years, might want to take another look at the opportunities on their own doorstep.

Artemis UK Select: The managers, Ed Leggett and Ambrose Faulks, target ‘undervalued growth companies’ rather than cheap companies per se.

‘It is a multi-cap fund that invests across the UK market – currently c.38 per cent is in mid-caps, 59 per cent in larger companies, 3 per cent in small caps and 3 per cent cash. Financials are a major theme (34 per cent). They have the flexibility to go short, though it is net long.

Fidelity Special Situations: This is Fidelity’s flagship UK fund, managed by Alex Wright. He is a contrarian who seeks to spot sound but out-of-favour companies trading at bargain prices with bounce back potential.

‘Wright invests in companies across the size spectrum. The fund is predominantly invested in UK equities (77 per cent), though can invest up to 20 per cent overseas (and does).

‘It is around 38 per cent in smaller companies and has 32 per cent in mid-caps, with 31 per cent in larger stocks. Circa 46 per cent of the fund is in cyclical stocks.

Jupiter UK Special Situations: Manager Ben Whitmore is a value investor, but crucially also incorporates a quality overlay into his process which helps avoid ‘value traps’ of companies whose shares are cheap but deservedly so.

 ‘Some 27 per cent of the fund is in smaller companies, 39 per cent in mid-caps and 32 per cent in larger companies. The main themes are consumer discretionary (21 per cent), financials (20 per cent) and industrials (15 per cent).

Head of investment analysis at Hargreaves Lansdown, Emma Wall, says:

Pyrford Global Total Return: The team behind the Pyrford Global Total Return Fund invest flexibly, but aim to keep things simple by focusing on a mix of shares, government bonds and cash, investing in companies across the globe, with the option to invest in emerging markets.

Artemis Global Income: Jacob de Tusch Lec, along with his co-manager James Davidson, scour the globe for companies they think can earn plenty of cash that can be used to pay dividends, looking beyond the usual names that make up many global income portfolios, and often investing in out-of-favour companies at attractive prices, such as those that are more sensitive to the health of the economy and those lower down the size spectrum, including higher-risk smaller companies.

Trojan Ethical Income: Hugo Ure, the fund’s manager, doesn’t invest in companies deemed unethical, such as those with significant involvement in armaments, tobacco, and fossil fuels, although the fund is still diversified across a range of industries, with the manager tending to find opportunities in consumer goods, healthcare and business software firms.

‘This fund could bring diversification to an income-focused portfolio or be a good addition to a responsible investment portfolio built to provide income.’

And the easy tracker option… 

Simon Lambert, editor of This is Money, says:

‘Our experts have all picked three actively managed funds, which could make good additions to any portfolio. 

However, if you just want to take the easy investing life, then you may want a low cost, passive tracker fund that invests around the world and seeks to profit from companies’ cumulative power to make profits and grow, rather than pick winners among them.

Vanguard’s LifeStrategy range is hugely popular for a reason. It invests in shares and bonds around the world and allows investors to choose the portfolio that best suits their risk profile, with a mix of shares and bonds. 

Each LifeStrategy fund holds 6,000 to 20,000 shares and bonds around the world. 

This is easy and cheap investing and can be a good starting point for investing, potentially the only fund anyone needs, or a solid core for a portfolio, where you can dabble in some interesting investing satellite options around it – such as the funds our experts mention above.

LifeStrategy comes in 100 per cent shares; 80-20 shares to bonds;  60-40 shares to bonds; 40-60 shares to bonds and 20-80 shares to bonds options. All have ongoing charges of 0.22 per cent.

The middle of the road traditional portfolio construction is 60-40 shares to bonds, but those willing to take a bit more risk may prefer the 80-20 shares to bonds options, over the past year their performance has been 9.2 per cent and 12.8 per cent, respectively.