Diversifying your ISA with funds

Andy Parsons, advice team manager at The Share Centre, suggests three funds from The Share Centre's Platinum 120 for investors seeking to diversify their ISA with funds in 2011.

Low risk - Henderson Strategic Bond fund

This is an 'all-weather' bond fund designed to perform across a range of market conditions. It has a flexible and wide mandate to exploit upside potential and to also protect capital during more difficult market conditions.

The managers take an active approach to running the fund, taking into account the outlook for growth, inflation and interest rates, as well as economic and political factors. These are then married with stock specific analysis including company valuation and credit risk.

With the aid of a well-resourced team and the scope and flexibility of the mandate we believe this fund has potential to generate an attractive return across the fixed interest spectrum. Income is paid out quarterly.

Medium risk - L&G UK Alpha fund

The L&G UK Alpha fund has been managed by Richard Penny since its launch in May 2005. It offers investors a tried and tested hybrid approach to investing in value and growth companies. The fund focuses on companies that have fallen out of favour with the market or are in the process of restructuring with the potential for rapid growth.

Penny can invest across the complete market cap spectrum but generally focuses his attention on AIM listed companies.  The fund generally holds in around 30-35 companies which Penny hopes will double in value over three years - showing this conviction in his choices.

This Fund is suited for those investors that are seeking value and opportunity whilst looking for longer term gains. However this fund should not be the only UK equity fund held in a portfolio due to the significant exposure to more volatile smaller to mid cap stocks.

High risk - Aberdeen Emerging Markets fund

Emerging Market investments are attractive because of their broad access to investments in Asia, Eastern Europe and Latin America. These three regions of the world have growing populations, an abundance of raw materials, developing financial markets and some are now even starting to demonstrate internal consumer demand.

The lure of potential higher returns is hard to ignore, but its not for the fainthearted and we recommend it only makes up a small proportion of your overall investment portfolio.

There are a variety of issues that make investing in the emerging markets of the world treacherous. Poor communication, poor regulation, lack of corporate governance and even corruption are just some of the difficulties faced within many of these regions.

This fund also favours a blend of large and mid cap companies. To pick the equities the team focus on a bottom-up approach with the main emphasis on absolute returns rather than the benchmark. Investments are generally bought on the basis of being held for the longer-term rather than regularly traded.