As we head towards the end of 2022, now could be the time for investors to start considering the investment trusts and funds to buy in 2023.
Investors are facing one of the most uncertain economic environments in recent memory, and buying the right investment trusts and funds for the environment, as well as your own personal risk profile, will be key for the next 12 months.
Alena Kosava, head of investment research at AJ Bell, has picked out eight investment trusts and funds for investors with different risk profiles and goals for the year ahead.
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Investments to buy for 2023
Investment trusts and funds to buy for cautious investors
Kosava highlights Personal Assets Trust (LSE: PNL) as a “solid choice” for investors looking to protect and increase the value of their portfolio over the long term.
The trust tends to do well in challenging market conditions and its exposure to inflation-protecting assets, such as gold and inflation-linked bonds, means it “has notable appeal.”
Its performance this year stands testament to the defensive positioning of the portfolio. The trust is down just to 0.4% year-to-date.
The Royal London Investment Grade Short Dated Credit fund is also an attractive investment for cautious investors, Kosava explains.
“The fund’s investment objective is to achieve a total return over the medium term (three to five years) by investing at least 80% in investment-grade bonds,” she explains. “Of these, at least 70% will be short-dated (bonds that will reach maturity within five years),” Kosava adds.
As bond yields have risen, the yield on the fund now stands at 3.2%.
Investment trusts and funds for investors seeking growth and income
The Fidelity European Trust (LSE: FEV) seeks to achieve long-term capital growth and income by investing in European equities. It is managed by Sam Morse who has “three decades of experience having worked at Fidelity for 18 years and looks for businesses exhibiting an ability to grow dividend sustainably over a three to five year period.”
Kosava notes that the trust has “offered protection in falling markets this year,” while also outperforming “both the broader European equity market and sector.” Some of the top holdings in the portfolio include household names Nestlé and the pharmaceutical giant Roche.
“As the prospect of recession is staring investors in the face, the importance of portfolio diversifiers in the form of real assets such as high-quality infrastructure has been clearly illustrated,” Kosava explains. On that basis, she is recommending the First Sentier Global Listed Infrastructure fund.
With over 40% of its portfolio invested in energy-related companies, it provides exposure to operators that are “leading on energy transformation while also giving exposure to critical distribution infrastructure such as railroads and toll roads.”
The fund has delivered a positive return this year, and its long-term performance is also “ahead of the broader market.”
Investments to buy for 2023 for adventurous investors
Worldwide Healthcare Trust (LSE: WWH) presents a great way to buy exposure to the global healthcare sector. While this trust has “faced some strong headwinds and underperformed its benchmark by 20%” in 2022, Kosava believes the fund’s exposure to revolutionary biotechnology companies could be an advantage in the years ahead.
“The trust’s managers, healthcare specialists OrbiMed, continue to find very attractive opportunities and the issues in China have created further buying opportunities,” she notes.
The trust has also been looking to invest in the unlisted private market, where it can buy into opportunities before other investors.
Emerging markets are another section of the global investment universe that has struggled in 2022. However, Kosava thinks JPM Emerging Markets Income fund now looks like an attractive acquisition for the year ahead.
“Yielding 4.2%, the fund aims to provide a portfolio designed to achieve income while participating in capital growth over the long-term,” she explains.
Stock picking is supported by a “dedicated portfolio management team focusing on the income consideration,” and the portfolio is spread across 90 different emerging markets stocks.
Income investment funds for 2023
For those investors seeking income in 2023, Kosava recommends City of London Investment Trust (LSE: CTY). With a dividend yield of 4.9%, the trust aims to provide long-term growth in income by investing primarily in London-listed stocks.
“It has the longest track record of dividend increases of any investment trust for annual increases in dividends since 1966,” she notes.
The trust’s board of directors “fully recognises the importance of dividend income to shareholders, with a relentless focus on consistency over time,” focusing on companies that have the potential to grow their payouts over the long term.
The Jupiter Asian Income fund is another pick for income investors for the year ahead. “In Asia, dividends have long played a key role in shareholder returns,” and the Jupiter Asian Income fund looks to capitalise on this.
The fund manages a concentrated portfolio of 28 names and currently offers a dividend yield of 4.7%. “Manager Jason Pidcock is a cautious investor, seeking out high-quality companies that have strong management and governance, as well as a clear focus on the shareholder to ensure dividends are a key part of the company strategy,” Kosava explains.
Just over a third of the portfolio is invested in Australian companies, including names such as Woodside Energy Group and BHP. The fund has outperformed its peer group year-to-date with a total return of 7.5% compared to -6.6% for the rest of the group.
• Rupert Hargreaves owns shares in Personal Assets Trust.
Rupert was the former Deputy Digital Editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing.
His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.
Rupert has freelanced as a financial journalist for 10 years, writing for several UK and international publications aimed at a range of readers, from the first timer to experienced high net wealth individuals and fund managers. During this time he had developed a deep understanding of the financial markets and the factors that influence them.
He has written for the Motley Fool, Gurufocus and ValueWalk among others. Rupert has also founded and managed several businesses, including New York-based hedge fund newsletter, Hidden Value Stocks, written over 20 ebooks and appeared as an expert commentator on the BBC World Service.
He has achieved the CFA UK Certificate in Investment Management, Chartered Institute for Securities & Investment Investment Advice Diploma and Chartered Institute for Securities & Investment Private Client Investment Advice & Management (PCIAM) qualification.
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