Six of the best ISA funds from TQ Invest

As we countdown to the end of the tax year, Nigel Walker head of research with tqinvest.co.uk the online execution broker, offers his ‘six of the best' funds worth considering for your ISA investment.

Artemis Income

This is one of very few funds which has two co-managers. This indicates the importance Artemis attach to this substantial fund of practically £3 billion. The fund has the attraction of the flexibility of being able to invest up to 20% in overseas markets, many of its peers do not and  Artemis are starting to put this wider scope available to them to good use. Generally companies with more predictable earnings are preferred, consequently there is a defensive bias to the portfolio, for example with stocks featuring in the heathcare sector featuring heavily.

Invesco Perpetual High Income

Managed by probably the best known of all UK fund managers, Neil Woodford, this has an outstanding track record over the last decade and more. The resolutely defensive approach he favours means that there will be spells when he will underperform against his peers (as happened last year when there was a sharp rebound in the FTSE 100 Index) however it does mean that  currently the fund is well placed to perform in an uncertain economic environment.

Newton Global Higher Income

They are well known as "income" fund managers.  This was one of the first funds available to retail investors rather than institutional investors like pension funds, which aimed to deliver an attractive income from global equity markets. Until fairly recently it was difficult to obtain any sort of meaningful income by investing in say German or American companies, however in a low interest rate environment, companies are slowly becoming aware that by making attractive dividend payments that it will raise their company profile and may provide a further reason why investors may invest in them.  A feature of this fund is that currently about one-third of their fund is invested in the Far East and Latin America, so also providing exposure to potentially higher growth economies.

M&G Strategic Corporate Bond

This is one of a range of funds managed by Richard Woolnough, the midway fund from a risk point of view. The intention behind the launch of the fund was to enable him to invest a portion (up to 20%) in high yield bonds, so providing more flexibility than was afforded by the existing fund. The large research team backing the manager has helped to ensure that the fund has navigated its way through the troubled times of the last few years considerably better than many of its peers.  As a result of this outperformance, this is now a £2 billion+ fund, spread across over 250 holdings.

Jupiter Absolute Return

Philip Gibbs has been one of the best fund managers for many years.  His speciality is in financial stocks and his judgment was excellent a few years ago as he was nervous over that sector, so held a very high cash and gilt exposure.  This ensured that his Financial Opportunities fund held up very well during the troubled credit crunch period. This fund provides the manager with greater scope to have significant flexibility, it can genuinely take a "go anywhere" approach.  The portfolio will invest in a range of assets including shares and fixed interest securities. A further feature is that the manager will be able to use strategies designed to make money in falling as well as rising markets. Note that a performance fee may apply if the fund meets certain performance criteria.

Schroder UK Alpha Plus

Richard Buxton continues to believe that an approach of simply closely tracking the FTSE 100 Index will not deliver the returns from a much more pro-active approach. Consequently being heavily overweight in banks in early 2009 has therefore been highly beneficial, as it usefully participated in their recovery. This takes a much more concentrated approach than many of its peers, its rigorous research approach meaning that generally around 35 shares are held, all of a broadly similar size.

Nigel Walker added, "When taken as a whole these funds should work well together because Artemis and Invesco Perpetual generally invest in companies with a defensive bias, so potentially could be resilient funds to hold during a time when the economic recovery remains fragile.  Newton provides overseas exposure (including higher growth areas like the Far East) but does so in a framework which still provides a high income. The Schroder fund with its very focussed growth bias complements the three income funds.  For diversification the M&G fund invests in corporate bonds, whereas the Jupiter fund with its very flexible approach, aims to deliver positive returns irrespective of market conditions."