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Top British investment funds for 2022

Businessman touching on number 2022 for preparation

We asked our freelance writers to reveal the investment funds they’re looking to buy for 2022. Here’s what they chose:

Edward Sheldon: Blue Whale Growth

My top investment fund for 2022 is Blue Whale Growth. This is a global equity fund that invests in high-quality growth stocks. Since its launch in 2017, it has delivered excellent returns for investors.

There are several reasons I like this fund. One is portfolio manager Stephen Yiu’s investment style. Yiu’s aim is to invest in world-class companies that will benefit from structural growth trends and grow their profits over time, but that are also available to buy at attractive valuations. I think this ‘growth at a reasonable price’ approach is a great way to invest.

I also like the focus on technology here. At the end of November, top holdings in the fund included Microsoft, Alphabet, Nvidia, and Adobe – which are all generating strong growth right now as the world becomes more digital.

I’ll point out that Blue Whale is a higher-risk fund due to its growth focus and its bias towards US tech stocks. If growth stocks and/or tech stocks fall out of favour in 2022, this fund could underperform.  

Overall, however, I see it as a very attractive investment fund.

Edward Sheldon has a position in Blue Whale Growth and owns shares in Microsoft, Alphabet, and Nvidia.

Rupert Hargreaves: Finsbury Growth and Income Trust

My top investment fund for 2022 is the Finsbury Growth and Income Trust (LSE: FGT).

UK equities appear deeply undervalued compared to their international peers. Even high-quality market leaders such as Diageo and the London Stock Exchange seem undervalued.

Finsbury Growth and Income invests primarily in UK companies to generate capital growth and income. Its portfolio manager is none other than Nick Train, widely regarded as one of the country’s top fund managers.

The fund invests in a concentrated portfolio of high-quality companies, although it is not limited to the UK. The third-largest holding in the portfolio is US-listed confectionery producer Mondelez International.

I think this trust is a great way to invest in undervalued UK equities while also building some exposure to international stocks. That is why I already own the shares and would be happy to buy more. The trust currently supports a dividend yield of 1.9% and has an ongoing charge of 0.6% per annum.

One risk I will keep an eye out for is concentration in the portfolio. The trust owns just 24 stocks, exposing it to volatility and losses if one large holding does not perform as expected.

Rupert Hargreaves owns shares in the Finsbury Growth and Income Trust and Diageo.

James J. McCombie: The Renewables Infrastructure Group 

The Renewables Infrastructure Group (LSE:TRIG) is my top investment fund for 2022 and beyond. TRIG is a FTSE 250 member and invests primarily in wind and solar energy infrastructure in the UK and Europe. New renewable energy projects will not be in short supply if climate change targets are met. 

TRIG is an income-orientated fund. The dividend yield is currently around 5.1%. Dividends per share have increased in each of the last five fiscal years. Dividend increases have been supported by earnings per share growing at 10% on average over the last 10 years. 

TRIG generates income from selling electricity produced by its assets. Investors get a degree of positive inflation exposure via the linkage to energy prices. But regulated energy price caps can erode this inflation-busting potential. In addition, this fund is exposed to one sector, energy. And at the moment it is expensive, trading above its net asset value. That being said, I am happy to continue buying TRIG in my Stocks and Shares ISA throughout 2022. 

James J. McCombie owns shares in The Renewables Infrastructure Group

Andy Ross: Liontrust Global Smaller Companies Fund 

My top investment fund for 2022 is Liontrust Global Smaller Companies Fund. This is a high conviction fund, which — as the name suggests — focuses on smaller companies. Holdings include Asana, and Fiverr, so it has a strong technology and US slant to it. The US accounts for about 81% of the portfolio. On the flipside, it has no direct exposure to emerging markets, which could be seen as a positive or a negative. In light of Beijing’s clampdown on Chinese tech firms, which may continue in 2022, I’m currently seeing that as a good thing.  

The fund appears to be a top performer with a great track record. Over five years it’s up 150%, well ahead of its benchmark. I also think it’ll do well in the future, especially in 2022 as markets hopefully continue to recover from the pandemic.  

I see the smaller companies-focused fund as a very attractive investment. Although, of course, being exposed to US tech does mean there’s an element of valuation risk with the fund, i.e. its holdings may have very high P/E ratios.  

Andy Ross has no position in the Liontrust Global Smaller Companies Fund or any other companies mentioned.

Paul Summers: Smithson Investment Trust

Having almost doubled in value (at the time of writing) since it launched in 2018, Smithson (LSE: SSON) has quickly become the largest holding in my Self-Invested Personal Pension (SIPP). It’s also my pick of funds to buy for 2022. 

Although not responsible for managing the fund himself (that duty falls to the increasingly impressive Simon Barnard), Smithson’s success serves as another endorsement of the investment approach of Terry Smith. Just like Fundsmith Equity, it looks to buy quality stocks at a reasonable price and then ‘do nothing’. The only difference is that it concentrates on the mid-cap rather than mega-cap market.

One does need to be aware that this is a very concentrated fund, with just 31 positions. This has the potential to make the share price more volatile if a few stocks underperform. Tapping into Smithson’s success also means paying the 0.9%. 

Still, it really is a case of so far, so very good for this low turnover, long-term focused fund. And while diversifying my cash into other holdings is still vital, I fully intend to continue adding to my position here.

Paul Summers owns shares in Smithson Investment Trust and Fundsmith Equity

Stephen Bhasera: Fidelity OTC Portfolio Fund

My top fund for 2022 is the Fidelity OTC Portfolio Fund. This actively managed fund has a great record, having returned 31% over the previous year and thus outpacing its benchmark index, the NASDAQ. Being heavily weighted in favor of tech stocks, the fund has large positions in Microsoft, Meta, Apple, Amazon, Alphabet, Nvidia and several other companies that are the cutting edge of tomorrow’s technologies. I therefore think it stands to benefit handsomely from the innovations being made in various technologies, particularly the Metaverse.

With net assets of about $23bn, this fund is all about growth and has outperformed the NASDAQ consistently over the past 15 years. I have two main caveats with this fund, however, the first being its expense ratio. At 0.8% it is certainly not cheap, but it is cheaper than several competing funds and has the results to justify the cost. Secondly, the fund is slightly more volatile than average. This is however to be expected to a fund that is so bullish on equities. Any risk is somewhat mitigated by the quality of the companies held and I think this fund will continue to do well over time.

Stephen Bhasera does not own have a position in the fund or any of the shares mentioned.

G A Chester: CFP SDL Free Spirit Fund 

Keith Ashworth-Lord’s Sandford DeLand asset management company runs just two funds: CFP SDL UK Buffettology (launched 2011) and CFP SDL Free Spirit (launched 2017). 

Both funds follow the philosophy of ‘business perspective investing’ — as espoused by the great US investor Warren Buffett — but Free Spirit focuses on small and mid-capitalised companies. Its two largest holdings (both above 5%) are Tatton Asset Management and business software firm Kainos. But there are also some more-widely-known names in the top 10, such as Bloomsbury Publishing and YouGov

The size of the companies and concentration of the portfolio (29 holdings at the last factsheet date of 30 November) make this a higher risk/reward proposition. The fund can be more volatile than its peers. But as of 30 November, it had delivered a return since launch of 86.2%, compared with a UK All Companies sector average of 29.6%. 

I think Ashworth-Lord has a sound investing philosophy and that Free Spirit can continue to outperform. 

G A Chester has no position in CFP SDL Free Spirit Fund.

Roland Head: Fundsmith Equity Fund

The Fundsmith Equity Fund provides all the things I’m looking for in an investment fund. Transparency, low costs, and a consistent investment approach have delivered a total return of 550% since the fund’s launch (as of 30/11/21).

Fundsmith’s investing strategy is to hold just 20-30 stocks, targeting companies with strong competitive advantages, high profitability, and reliable cash flows. The fund’s top holdings at the end of November included Microsoft, L’Oréal, PayPal, and Philip Morris.

All the fund’s partners, led by founder Terry Smith, hold a significant portion of their personal wealth in the fund. This makes me confident that investors’ interests are well-aligned with those of management.

My main concern with Fundsmith is that many of the stocks held by the fund look quite expensive to me after the bull market we’ve seen since March 2020. I wonder if returns might now slow for a while.

However, I only see this a short-term risk. Looking further ahead, I’m confident that Mr Smith’s disciplined strategy and proven track record are likely to lead to attractive future returns for the fund’s investors.

If I was investing my cash in a fund for 2022, Fundsmith is where I’d start.

Roland Head does not own have a position in Fundsmith or any of the shares mentioned.

Royston Wild: The Renewables Infrastructure Group 

The huge press attention surrounding COP26 this past autumn underlines the rising importance that sustainability commands in the global zeitgeist. This is naturally filtering through to the way investors behave and propelling interest in sustainable funds. Latest figures from The Investment Association show that responsible investment funds commanded two-thirds of total fund inflows in September. They attracted a whopping £1.6bn worth of new investment. 

We at The Motley Fool have seen interest in renewable energy stocks pick up considerably of late. And one UK share I think could be a great way to play the steady transition to green energy from fossil fuels is The Renewables Infrastructure Group (LSE: TRIG). This investment trust has built a portfolio of onshore and offshore wind assets and solar farms in Britain, France, Sweden and Germany. It also operates a battery storage asset in Scotland. 

Such technological and geographical diversification provides added robustness to TRIG’s investment case. Though bear in mind that the often-unreliable nature of green energy generation doesn’t make this investment trust completely free of risk. I’d buy the investment fund because of its juicy 5.2% dividend yield for 2022.

Royston Wild does not own shares in The Renewables Infrastructure Group.

The post Top British investment funds for 2022 appeared first on The Motley Fool UK.

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