Four funds your family will love this Christmas

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Four funds your family will love this Christmas

With Christmas less than two weeks away, we've had a bit of fun and picked a single high-quality fund for every member of the family to own in 2018 and beyond.

They're all exciting funds run by highly experienced managers, but which have yet to fulfil their obvious potential.

Investors should remember that, given the volatility associated with a specialist and smaller companies funds, they should only play a satellite role as part of a broader well-diversified portfolio.

Merry Christmas Dad!

First State Global Listed Infrastructure

First State Global Listed Infrastructure invests in high-quality companies that are involved in infrastructure around the world. The infrastructure sector includes utilities like water and electricity, highways and railways, airports services, marine ports and services, and oil and gas storage and transportation. The largest holdings include National Grid (NG.), Kinder Morgan (KMI), Transurban Group, Dominion Resources (DOM) and East Japan Railway.

The fund has been run by highly experienced manager Peter Meany since launch in October 2007. He is supported by co-manager Andrew Greenup, with whom he built First State's infrastructure equity business, and a dedicated team of analysts.

It is a concentrated portfolio of around 40 stocks, typically with a large-cap bias. Their investment process and desire to preserve investors' capital means that the portfolio typically has a bias towards the operators of infrastructure assets, primarily in developed countries.

Global listed infrastructure companies benefit from high barriers to entry, strong pricing power, predictable cash flows and sustainable growth that allowed them, over the past years, to deliver higher returns than global equities with a lower level of risk.

The nature of infrastructure assets means they are typically able to increase prices in line with inflation, providing a stable and growing distribution yield over time. On top, global listed infrastructure has relatively low correlations with other asset classes, and provides diversification benefits within an investment portfolio.

  YTD 1 Year 3 Years 5 Years
First State Global Listed Infrastructure Fund 8.47 11.39 14.44 15.80
S&P Global Infrastructure Index 10.62 15.07 11.54 13.67
Sector Equity Infrastructure 10.14 13.01 9.60 10.34

Source: Morningstar Direct as at 30th November 2017. Total returns in GBP.

Happy Holidays Mum!

GAM Luxury Brands

GAM Luxury Brands invests in leading global luxury companies with excellent brands, high quality products and continuous innovation. Luxury brands companies are typically very profitable and benefit from pricing power and heritage premium. This means they hold their pricing better than everyday items in difficult financial conditions, and their products cannot be replicated overnight. The fund has close links to established brands in Switzerland, Italy and France.

The largest positions in the fund are LVMH Moet Hennessy SA (MC), Hermes International (RMS), Kering (KER), L Oréal (OR) and Estée Lauder (EL).

GAM Luxury Brands is managed by Scilla Huang Sun and Andrea Gerst who have more than 40 years of combined investment experience. They focus primarily on bottom-up stock selection, but also consider prevailing secular themes and industry trends. Their portfolio is well diversified across sub-sectors (hard and soft luxury, cosmetics, beverages, automobiles) and holds around 25-40 stocks.

Global wealth is expected to rise 5.5% annually until 2021 as demand for luxury is robust, underlined by a strong economic backdrop. Managers believe that this should result in an increased number of luxury goods consumers.

The fund provides investors with the opportunity to benefit from increasing wealth and luxury consumption not only in developed, but also emerging markets, through high-quality western luxury companies. It is suitable for long-term oriented investors willing to accept higher risk in return for higher reward.

  YTD 1 Year 3 Years 5 Years
GAM Luxury Brands Fund 20.73 24.29 10.17 10.30
MSCI World Index 10.24 14.13 13.57 15.59
Sector Equity Consumer Goods & Services 14.77 17.44 11.16 11.70

Source: Morningstar Direct as at 30th November 2017. Total returns in GBP.

Wintry Wishes eldest child

Candriam Robotics and Innovative Technology

Candriam Robotics and Innovative Technology provides the opportunity for investors to benefit from the structural growth of robotics, automation and innovative technology such as artificial intelligence (AI), virtual reality, and smart factories.

It is managed by the highly experienced Johan Van der Biest, who's run the technology equity process since its inception in May 1997. This process was put in place as a Belgian-registered fund in 1997 and was redefined as Robotics and Innovative Technology in December 2016, with the Luxembourg-registered fund launched in March 2017.

The investment process is a bottom-up fundamental equity selection of companies that offer disruptive technologies and which form a high-conviction portfolio of 30 to 50 stocks.

According to Van der Biest, the fund is well positioned to tap into Moore's Law, which predicts technological growth will continue at an exponential rate of expansion as we enter the 'Fourth Industrial Revolution'.

The use of Machine Learning and AI, Big Data technology, the transition to the public cloud and increased use of OLED, virtual reality, 5G technology, Internet of Things, advanced robotics and programmatic advertising are just a few examples of exciting trends the fund is investing in.

Companies such as Facebook (FB), Alphabet (GOOGL), Intuitive Surgical (ISRG), Rockwell Automation (ROK), Salesforce (CRM), Omron, Delphi (DLPH), Keyence and Paypal (PYPL) are among the biggest positions in the fund.

  YTD 1 Year 3 Years 5 Years
Candriam Robotics & Innovative Technology Fund 37.18 38.32 24.43 23.51
MSCI Information Technology Index 26.25 29.45 22.52 23.49
Sector Equity Technology 26.00 27.92 20.56 20.13

Source: Morningstar Direct as at 30th November 2017. Total returns in GBP.

And for the youngest…

Standard Life Global Smaller Companies

Standard Life Global Smaller Companies seeks to capture the potentially substantial rewards offered by smaller company investing, with the added diversification benefits of access to global opportunities both in emerging and developed markets.

Current top holdings include Cognex Corporation (CGNX), NMC Healthcare (NMC), Fever Tree (FEVR), Align Technology (ALGN), Sunny Optical, Jungheinrich, Disco, Heico (DEI) and WageWorks (WAGE).

This fund has been managed since launch in 2012 by Alan Rowsell. He is supported by respected manager Harry Nimmo and a wider team of dedicated analysts. They employ the same bottom-up approach used to manage the highly successful UK and European smaller company's funds.

The approach, termed the 'Matrix', is used to screen the stockmarket for quality companies capable of strong growth for the 50-stock portfolio. Factors used within this process include market share, barriers to entry and pricing power.

Managers aim to identify tomorrow's successful larger companies today. Once they find good companies they will look to own them for an extended period of time, so investors benefit from both earnings and dividend growth. Examples of companies which the UK Fund no longer hold but held from a very early stage, include ASOS (ASC), Rightmove (RMV) and Ted Baker (TED).

Smaller companies usually outperform larger companies over the long term, and the fund provides investors with the opportunity to benefit from this anomaly. While smaller companies are considered high risk, focusing on high-quality growth stocks allows the manager to reduce risk at a fund level.

  YTD 1 Year 3 Years 5 Years
SLI Global Smaller Companies Fund 26.04 30.46 21.25 18.59
MSCI World Small Cap Index 10.31 14.20 16.46 17.47
Sector Global Small Cap Equity 11.61 15.32 15.26 16.41

Source: Morningstar Direct as at 30th November 2017. Total returns in GBP.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.