Funds set to benefit from Autumn Statement

Delivering his first Autumn Statement since being made chancellor in July, Mr Hammond yesterday (23 November) said he wanted to prioritise infrastructure and innovation, and promised to invest £23bn over the next five years.

He said: "As the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure the next generation of discoveries is made, developed and produced in Britain."

The chancellor also plans to invest an extra £2bn in research and development each year by 2021.

Darius McDermott, managing director of Chelsea Financial Services, said the chancellor's plans to invest in physical and digital infrastructure, as well as science and research, could bolster investment vehicles that allocate assets to these types of companies.

He said, for example, the Man GLG Undervalued Assets fund could benefit from more money being set aside for affordable housing and supporting local infrastructure, while house builders should again get a boost. 

Mr McDermott said the VT Infrastructure Income fund, which launched earlier this year, could win from the chancellor’s announcement because it invests in UK infrastructure projects and targets a yield of around 5 per cent.

“This will appeal for investors looking for more than the 2.2 per cent gross interest promised via the new NS&I product next year, and willing to take on more risk to achieve those potentially better returns.”

He said the boost through tax breaks to smaller companies across the UK will not only be welcomed after the worries of the Brexit vote, but would help funds like Wood Street Microcap.

“This a highly concentrated, high conviction UK micro-cap fund, which has been managed by Ken Wotton since its launch in 2009, with the support of the 40-strong specialist team.

Mr McDermott also pointed out the fund has a number of holdings in software and digital businesses.

He also said the Woodford Equity Income fund and Woodford Patient Capital trust could stand to win from the announcements in the Autumn Statement.

“Neil Woodford has a well publicised liking for science research and development and has been a long-term supporter of our universities and fledgling companies. 

“The tail of his open-ended fund and his investment trust may well benefit from the increased support and funding for this area of the UK economy.”

Adrian Lowcock, investment director of Architas, said the John Laing Infrastructure fund, which has a current yield of 5.3 per cent and diversified portfolio across a range of individual projects and sectors, should benefit from the Autumn Statement. 

Mr Lowcock said: “The fund invests directly in the equity and looks for concession projects where the asset returns to the government at the end of the concession period.  

“This is a defensive fund and one of the more conservative strategies in the sector. It offers a diversified source of returns, compared to equities and bonds, and a more predictable, inflation-protected yield.”

He also pointed to the International Public Partnerships fund, which invests solely in availability-based projects, such as schools and hospitals, that earn a pre-determined, contracted revenue on the basis that they are available for use.  

Mr Lowcock said: “There is no volume risk or sensitivity to the strength of the economy.  The majority of projects have cashflows that are linked to inflation.” 

Jo Hambro UK Equity income was also identified by Mr Lowcock as a fund likely to receive a boost.

Managers Clive Beagles and James Lowen look for companies where the potential for future earnings and dividend growth is under appreciated. 

The bigger opportunities for infrastructure are probably global in nature.Jason Hollands

However Jason Hollands, managing director of Tilney Bestinvest, said the step-up in infrastructure spending and house building in the UK have been well flagged.

“The UK fiscal stimulus measures are not of ‘shock and awe’ quantum like those being mooted for the US infrastructure funding,” he said, adding the policies confirmed in the Autumn Statement are for government-led projects with deficit financing. 

“The bigger opportunities for infrastructure are probably global in nature and therefore if you want to play this theme, then look at global infrastructure equity fund such as Lazard Global Listed Infrastructure Equity.

“The exposure of Woodford Equity Income to small, tech companies is small in the scheme of the portfolio and it isn't all UK." 

Mr Hollands suggested the businesses that will benefit from the government initiatives will be unquoted and venture capital-funded businesses, adding: “Clearly there could be real winners among Aim-listed small caps.”

“Overall though, the better investment opportunities staring investors in the face in the near-term are likely to remain with larger companies with high overseas revenues."

He said these companies benefit both from sterling's weakness and are where big earnings upgrades could come through next year.

katherine.denham@ft.com