Artemis US Smaller Companies, Liontrust Special Situations and Ruffer Diversified Return are among some of the funds on Square Mile’s list of portfolios that it believes are best-equipped to navigate 2024.
While the firm pointed out that geopolitical risk only increased last year, it said “there is always a good cohort of fund managers across asset classes” who are able to perform irrespective of how challenging the backdrop is.
Below, Square Mile’s team of fund analysts discuss nine funds they have a “good level of conviction” in for meeting their investment goals in 2024:
See also: RLAM and Artemis funds added to Square Mile academy
Polar Capital Global Insurance
The Polar Capital Global Insurance fund, which holds an AA rating in Square Mile’s Academy of Funds, typically holds 30 to 35 holdings mostly in medium-sized insurance companies. The fund aims to return 10% annually, and avoids investments in long-term liability claims as well as, for the most part, life insurers.
David Holder, senior investment research analyst for Square Mile, said: “We like the AA-rated Polar Global Insurance fund for several reasons, not least due to the proven investment approach of its lead manager, Nick Martin.
“It invests in a sleepy sub-sector of markets that is not widely covered, perceived as complex and which includes many firms of variable quality. Mr Martin has built a deep pool of company knowledge and is well informed in the intricacies of investing in this sector.”
Redwheel Global Emerging Markets
The Redwheel fund, which holds an A rating from Square Mile, aims to outperform the MSCI Emerging Markets index by 3% yearly over five-year periods. The long-term capital growth fund is run by manager John Molloy.
Amaya Assam, head of fund origination, said: “He has an impressive long-term track record and is supported by a diverse and experienced team of dedicated analysts. Mr Molloy applies a well-constructed process which includes markets that are often overlooked by other investors, and he seeks to take advantage of these where they present attractive growth opportunities.”
Comgest Growth Europe Smaller Companies
The Comgest fund, which invests in 25 to 30 companies with a market cap of €1-€10bn, has an A rating from Square Mile.
“The team’s edge is its company analysis and an absolute return mindset with the strategy’s success measured by investee companies’ longer-term earnings capability,” Assam said.
“The portfolio can have some sizeable positions at the stock, sector and country level which can be a double-edged sword at times, as the portfolio concentration can be beneficial when stock selection is working. However, it can also add to the fund’s volatility, which is already an inherent feature when investing in smaller companies.”
Liontrust Special Situations
Anthony Cross and Julian Fosh’s Special Situations fund is marked with an AA rating and has 55 holdings, with a fund size of £3.9bn. Established in 2005, the fund has a low stock turnover and operates as a capital growth-oriented strategy.
Mark Hinton, equity fund research manager, said: “The team works in a highly collegiate manner and has complementary skill sets, and together its members apply a very well-considered and defined investment process. This steers them towards relatively steady businesses that are gradually growing, generating high levels of cash and have a clear competitive edge.”
Man GLG Sterling Corporate Bond
While Square Mile said this ‘positive prospect’-rated bond fund can experience short-term volatility, it believes the fund is a good option for offering growth and income. The fund is managed by Jonathan Golan, who has a goal of extracting “100% of the fund’s performance aspirations through credit selection”, said Square Mile’s Eduardo Sánchez, the associate research director for fixed income, alternatives & multi-asset.
“Unlike many of its peer group, this fund’s edge lies in its bottom-up focus on smaller issuers and Mr Golan’s supporting team’s ability to extract excess returns from undervalued credits; many of which are overlooked by larger scale investors,” he said.
Wellington Global Impact Bond
The Article 9 fund from Wellington holds a Responsible AA rating from Square Mile and has $602.7m assets under management as of 9 January.
“Their impact investment process is well thought through, considering issuers against the materiality, the additionality and the measurability of their impact investment case,” Sánchez said.
“We believe that these considerations have created a very solid base on which the team has built a credible impact strategy while also aiming to provide above-market financial returns.”
Artemis US Smaller Companies
The AA-rated fund has 50-70 companies with a market cap ranging from $1bn to $10bn in US companies. Led by Cormac Weldon, the fund holds £748m assets under management and launched in 2014.
Ajay Vaid, investment research analyst, said: “He and his team believe that investors can be slow to price in the implications of change that can enable style-agnostic investors to outperform the market, regardless of market conditions.
“The team conducts considerable macroeconomic analysis in order to understand cyclical and secular trends, as well as the broader outlook for the US economy.”
WHEB Sustainability
The Responsible AA-rated WHEB fund invests in 40 to 60 responsible companies and holds £717.1m assets under management. Stocks fall under nine themes, including cleaner energy, sustainable transport, resource efficiency, environmental services, water management, well-being, health, safety and education, and must derive 50% of its revenue from these themes.
Charlie McCann, investment research analyst, said:“Collectively, they apply an investment process which sets a high hurdle for inclusion in the portfolio to keep the overall impact high.
“As a result of this process, and where the team tends to find suitable stock ideas, the fund is likely to have significant biases to areas of the market such as the healthcare and industrials sectors, and towards mid-capitalisation companies. Conversely, it is unlikely to have any meaningful exposure to the energy and financials sectors and has a notable underweight to the largest companies within its MSCI World benchmark.”
Ruffer Diversified Return
The Ruffer fund, which holds an A rating, is managed by Duncan MacInnes and Ian Rees, but asset allocation and investment themes are determined by Ruffer’s asset allocation committee which meets at least once a week. The fund balances out global equity investments with holdings including cash, conventional bonds, index-linked bonds, and various derivatives. As of the end of December, it held £1.9bn in AUM.
Alex Farlow, associate director of multi-asset research, said: “The exposure to options and other derivatives is primarily used to reduce directional equity market or interest rate risk when deemed appropriate.
“This sets this fund apart and has been particularly and consistently successful in protecting investors’ capital when it matters most. We note that performance has been disappointing in 2023, but we expect it to bounce back in 2024.”
