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Six funds and trusts to watch in 2022

Six funds and trusts to watch in 2022

With markets rebounding as Covid vaccines were rolled out, inflation soaring and interest rates rising, 2021 was an unpredictable year.

As investors look to 2022, inflation protection, ESG ratings and the growth vs value discussion will be on their minds.

We’ve rounded up experts’ top funds and investment trusts to watch in 2022.

For long-term inflation protection: M&G UK Inflation Linked Corp Bond

The £1.22bn fund should provide investors with long-term protection against inflation, while offering something a little different to the traditional government inflation-linked bond fund.

The manager uses three different levers to generate returns: inflation, interest rates and credit spreads. 

John Monaghan, head of research at Square Mile Investment Consulting and Research, said the fund is managed with a total return orientation and a defensive approach.

“This fund has been able to deliver positive returns under different market scenarios, with a low volatility profile and very limited drawdowns,” he said.

For exposure to sustainable leaders: Stewart Investors Asia Pacific Leaders Sustainability

The managers of this fund aim to grow capital through investment in high quality, responsibly run companies that drive positive change and are leaders in sustainability.

It returned 12.9 per cent in the year to December 31, outperforming its benchmark by 15 percentage points.

Monaghan said this fund has typically defended well in falling markets; its emphasis on quality was sensible over the long term, especially in a region that can suffer large drawdowns. 

However, he added “the portfolio’s unconstrained nature can mean that country and sector allocations, driven by stock selection, can be sizeable and therefore can impact performance.”

For value investing: Fidelity Special Values 

This £907m trust is run by Alex Wright and Jonathan Winton, and invests in undervalued UK equities.

Juliet Schooling Latter, research director at Fund Calibre, said: “Value investing was deemed to be all but dead by many investors, but it too staged a comeback in 2021 on the back of the vaccine bounce and economies reopening.”

The trust invests in “unloved” companies, waiting for them to return to favour. For the year to November 31 it saw NAV and share price returns of 30.3 per cent and 29.2 per cent respectively above its benchmark index, which posted a 17.4 per cent return. 

For those who love an underdog: Baillie Gifford Global Discovery  

This global equity fund saw a disappointing -38.3 per cent return in the year to January 19, compared with its 77.9 per cent return in 2020.

Schooling Latter said it suffered in 2021 due to market sentiment and inflation worries hitting its underlying stocks, many of which are early-stage businesses.

“There is no doubt it has been a hard year for the fund’s investors, but we believe in the process and the long-term prospects, so still support it,” she said.

For private equity exposure: HGCapital Trust

Anthony Leatham and Markuz Jaffe, analysts at Peel Hunt, recommend this trust as a “stand-out” performer in the private equity sector.