Our Top ISA - Bestinvest€¦ · about opening an ISA or using your allowance, speak to our experts by calling 020 3553 3239 or emailing [email protected] Discover ISA ideas closer

HS2

Our Top ISA Investment Ideas

2020

UK companies: investing closer to home See page 5

ISA investments that make an impact See page 10

Indestructible infrastructure See page 18

Important information

The value of your investment and the income derived from it can go down as well as up and you can get back less than you originally invested. This guide is not advice to invest, or to use any of our services. Our opinions may change without notice. Prevailing tax rates and the availability of tax reliefs are dependent on your individual circumstances and are subject to change. Please note we don’t give tax advice.

UK companies: investing closer to home

ContentsOur Top ISA Investment Ideas | 2020 | bestinvest.co.uk

How to use your ISA allowance

Online | bestinvest.co.uk/isa | Invest in your ISA or open an account online.

Speak to us first | If you have any questions or would like to know more about opening an ISA or using your allowance, speak to our experts by calling 020 3553 3239 or emailing [email protected]

Discover ISA ideas closer to home with our spokesperson, Jason Hollands.

5

High-quality companies with strong balance sheets: here are our best investment ideas.

Top-rated European giantsOur analyst for Europe, Tom White, celebrates the continent’s most dynamic businesses, such as: Nestlé, Adidas and Ferrari.

Indestructible infrastructureFrom railways to smart cities, here are some attractive growth opportunities for your ISA.

ISA investments that make an impact Find out how to invest if you’re concerned about climate change.10

18

14

1212 Asia’s time to shine?

http://bestinvest.co.uk

http://bestinvest.co.uk/isa

Tel: +44(0)20 3553 3239

mailto:best%40bestinvest.co.uk?subject=

What’s inside?This year, our lead article is keeping us close to home as we celebrate the potential of UK companies. After a challenging couple of years dominated by the B word, uncertainty is lifting and – in our opinion – the UK market looks compelling. In 2020 another big theme is of course the environment and with Bestinvest investors asking lots of questions about how their ISA investments can make a positive impact, we’ve drafted in our ethical guru Louie French to share his insights.

As we put this magazine together, the world is racing to tame the coronavirus and this new uncertainty, on top of the likes of the US/China trade war, has seen Asian shares pushed to the side. For sure, the region is not without its risks but for those considering investments further afield and with an appetite for risk, we think it’s worthy of a good look.

Our analyst for Europe Tom White has written a fascinating article that tells the story behind some of Europe’s great brands such as Adidas and Nestlé, and highlights the funds that give you exposure to them. We’re also looking at infrastructure, where there are exciting opportunities in the UK and further afield as governments forge ahead with a vast range of projects on an epic scale.

Happy investing! The Bestinvest team

The clock is tick-tocking down to the end of the 2019/20 tax year on 5 April, which means the new edition of Our Top ISA Investment Ideas is here to give you investment inspiration for your ISA.

Hello

Online It’s quick and easy to open an ISA account online or top up your existing Bestinvest ISA by visiting: bestinvest.co.uk/isa

You can invest right up until midnight on 5 April but we wouldn’t suggest leaving it until the last minute – you know how the Wi-Fi can play up!

By post If you are a Bestinvest client who invests through Aegon or FundsNetwork, you can make ISA contributions by sending a cheque through the post. Your cheque must arrive with us by 2 April (this is because tax year-end is on a Sunday this year). Please send your cheque to the following address:

Tilney, 2nd Floor Royal Liver Building Pier Head Liverpool L3 1NY

This tax year the ISA allowance is £20,000 for adults and £4,368 for kids. You have until the clock strikes midnight on 5 April to use your allowance or you’ll lose it – this is because you can’t carry ISA allowances over from one tax year to the next.

Your 2019/20 ISA allowance – important reminders

How to use your allowance

4 Our Top ISA Investment Ideas

Any questions?

Don’t be a stranger. We’re here to answer any questions you have. Just give us a call on 020 3553 3239 or email [email protected]

Remember; this magazine is not personal advice. If you’re not sure about the suitability of an investment, please contact a financial adviser.

http://bestinvest.co.uk/isa

Tel: +44 (0)20 3553 3239


Our Top ISA Investment Ideas 5


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Funds may carry different levels of risk depending on the industry sector(s) in which they invest. You should ensure that you understand the nature of any fund before you invest in it. This is not advice to invest. Yields quoted are net. They are not guaranteed and can go down as well as up. Current or past yield figures provided should not be considered a reliable indicator of future performance.

UK companies: investing closer to home

UK funds are traditionally popular with ISA investors who often like to choose funds that invest in familiar companies. The great news is that this year, in our view, the investment case is compelling.

According to Jason Hollands, our familiar Bestinvest spokesperson, the uncertainty we’ve lived with in recent years is finally lifting. In particular, last December’s General Election led to a conclusive result that has ended the political gridlock and, for better or worse, we’ve left the EU.

Post-Brexit clarity: reconsidering investing choices According to figures from the Investment Association, there have been more than £12 billion of net outflows from UK equity investment funds by private investors since 2016. That’s not surprising, given that in the past couple of years barely a day has passed without headlines about Brexit.

“Last year saw a lot of business decisions put on hold as companies waited for more clarity on both Brexit and who would form the next UK Government. With the election resolved, delayed hiring and investment decisions are expected to resume and there are also signs of a pick-up in the property market.”

“What should also benefit the domestic economy”, explains Jason, “is that austerity, that belt-tightening period put in action by the Government to try and reduce the deficit, has now ended. During the election period, the main parties all pledged to spend more money on public services and infrastructure investment, including the Conservatives. As that spending ratchets up during the year, it should provide a boost to the economy.

“It’s a time when many ISA investors should start revisiting their allocation to the UK market. Indeed, some have started to do so: in December private investors poured £1.3 billion back into UK funds, reversing a long trend of outflows. This renewed appetite potentially has much further to go. Since it has relatively been out of favour, UK share valuations are trading at quite a discount compared to many other developed markets, especially the US where share valuations look expensive compared to the longer-term trend”.

US vs UK shares, buybacks vs dividends“One of the reasons the US market has got so expensive is that share buybacks by US companies themselves have driven stock prices higher. In fact, in recent years,

US companies buying their own shares have actually been a bigger influence than people investing in the markets through either funds or pensions.

“Instead, one of the really distinctive features about the UK stock market”, explains Jason, “is that there is a long history of UK companies paying out dividends to shareholders. There is a strong dividend culture here: that isn’t the case everywhere else. In the US, dividends are lower and many companies, including very big companies, don’t even pay one. They prefer to use cash to buy back their own shares. That’s another reason why the UK should be on the radar of ISA investors: it remains the standout market globally for paying an attractive level of dividend income. The UK stock market is currently yielding circa 4.2%, over twice that of the US market.

Jason Hollands, our Bestinvest spokesperson, presents the case for choosing UK funds for this year’s ISA.


“JO Hambro CM UK Dynamic, a very popular ISA choice, for instance, is a fund favouring companies that are either paying a dividend or are expected to do so shortly, so it typically offers a reasonable yield of 4.2% while investing in unloved companies that are undergoing positive change, such as a restructuring with the potential for the shares to rise as they return to favour”, explains Jason.

Alex Savvides, manager of JOHCM UK Dynamic, can point to his portfolio as evidence of a record of challenging orthodox thinking in the stock market. Whether it is backing supermarket group Morrisons at a time when it was struggling in 2014; investing in the turnaround story at The Restaurant Group; or buying 3i Group in the teeth of the financial crisis – this is a manager with real conviction in stocks.

Value and growth styles: in or out of favour?There are plenty of reasons why the UK market looks attractive right now. Identifying the best ISA opportunities could come down to the style adopted by a manager.

“Since the financial crisis”, explains Jason, “markets have craved companies with predictable revenue streams. Businesses

that provide everyday products, that people will buy whatever the economic ups and downs, have proven really popular. Examples include Guinness-owning drinks giant Diageo, and Unilever whose brands include the likes of Persil, PG Tips, Ben & Jerry’s and Marmite. Fund managers that have focused on such companies have done well. We call this investment style ‘quality growth investing’. The managers of Liontrust Special Situations, another popular fund for ISA investors, broadly adopt this investment style. The managers look for companies with an ‘economic advantage’ such as ownership of intellectual property, unique distribution or income streams that recur each year, for example under contracts. These qualities make them more resilient to competition and less sensitive to changes in the economic cycle. This typically leads them away from areas such as banking and mining”, explains Jason.

Liontrust Special Situations invests in companies regardless of their size or sector, enabling the managers to find the best opportunities wherever they are across the UK stock market. Some of their most popular holdings are: Unilever, a company that meets every day needs for nutrition, hygiene and personal care; Clipper Logistics, specialising in storing,

handling and transporting high-value fashion and luxury goods; and The Pebble Group, a provider of products, services and technology to the global promotional industry.

Another common approach to investing focuses heavily on valuations and is called value investing. Fund managers that follow this style put a greater emphasis on trying to find companies they identify as undervalued by the markets with the belief that if the business is sound then over time valuations will catch up. “This style of fund management”, claims Jason, “has been out of favour for a number of years because investors have favoured growth stocks that have wind in their sails. But the opportunities for value investors have started to reappear. We saw some of that towards the end of 2019 in the UK market: as the worries about the political uncertainty started to lift, those out of favour and unloved domestically-focused businesses had quite a nice bounce in share prices.

“Fidelity Special Situations, managed by Alex Wright, is a prime example and could make a great ISA idea for investors. Wright often buys stocks that are out of favour with the market and is prepared to hold them for the long term to realise value, targeting corporate potential, hidden jewels


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Funds may carry different levels of risk depending on the industry sector(s) in which they invest. You should ensure that you understand the nature of any fund before you invest in it. This is not advice to invest. Yields quoted are net. They are not guaranteed and can go down as well as up. Current or past yield figures provided should not be considered a reliable indicator of future performance.


and unrecognised growth”. The fund’s top holdings include drug manufacturers such as Roche and British infrastructure giant John Laing.

“It’s very difficult to predict when one style of investment approach is going to come in or out of favour”, says Jason, “but what we do know is growth investing has had a very strong run for many years. We are at a point where investors could consider diversifying their ISA investments to include some managers who have an approach that places a higher emphasis on value”.

The home court advantage of UK small-capsThe UK market is dominated by some very large, international companies. Indeed it is estimated that over 70% of the earnings of the top 100 companies are made outside the UK. But medium-sized and smaller companies could bring you closer to home.

“As you move down the market spectrum to mid-caps and smaller companies”, explains Jason, “that’s where you tend to find the more domestically-focused businesses.

“Most of the companies listed on the UK markets – both the main market and AIM – are smaller companies. However,

many investors have very little exposure to these opportunities because a lot of funds – particularly index trackers – are heavily focused on the very largest companies. Yet over the long term, smaller companies and mid-caps have given much higher returns than larger companies. After all, this is where the big companies of tomorrow will be found”. But remember, smaller UK companies can be higher risk.

If you want to dedicate part of your ISA allowance to smaller companies, Jason highlights the LF Tellworth UK Smaller Companies fund as another great example: working for their own boutique Tellworth in London, managers Paul Marriage and John Warren invest in the bottom 10% of the UK equity market by value with a particular focus on those from £50-£500m in size.


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Past performance or any yields quoted should not be considered reliable indicators of future returns. Funds may carry different levels of risk depending on the industry sector(s) in which they invest. You should ensure that you understand the nature of any fund before you invest in it. This is not advice to invest. Shares in smaller companies can be more volatile and less liquid than those in larger companies, so funds investing in smaller companies can carry more risk.


• Invests in UK small companies

• Long-term capital growth

• No oil and gas, mining or biotech

Initial charges through Bestinvest

0.00%Ongoing Charges

0.95%

LF Tellworth UK Smaller Companies • Targets corporate potential and

hidden jewels

• Invests in UK equities and selected overseas companies

• Long-term capital growth



0.91%

Fidelity Special Situations

• Quality growth investment

• Targets UK companies regardless of their size or sector

• No banking and mining



0.87%

Liontrust Special Situations

• Favours companies paying a dividend

• Mainly invests in equity on the London Stock Exchange

• Targets unloved companies undergoing positive change



0.67%

JO Hambro CM UK Dynamic


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Funds may carry different levels of risk depending on the industry sector(s) in which they invest. You should ensure that you understand the nature of any fund before you invest in it. This is not advice to invest. Shares in smaller companies can be more volatile and less liquid than those in larger companies, so funds investing in smaller companies can carry more risk.

If you want to invest in an ISA but don’t have time to choose and manage your own investments, how about a Ready-made Portfolio? Bestinvest has a range to choose from that take the hard work out of investing.

Here’s what you need to know We choose the investments in each Ready-made Portfolio and manage them so you don’t have to make any investment decisions.

All you need to do is pick the portfolio that suits you best – whether you’re cautious with your money, want to be more adventurous, or want to invest ethically, we’ve got one for you.

We’ll send you regular updates to let you know how your investments are doing and you can check on them via your online account any time you want.

Investing doesn’t need to be any more complicated!

You can add a Ready-made Portfolio to your ISA in minutes: Visit bestinvest.co.uk/ready-made or call us on 020 3553 3229.

Have you tried a Ready-made Portfolio yet?They’re built by us, for you

Many people aren’t comfortable investing their life savings without speaking to a professional first. That’s why we’ve introduced Bestinvest Plus. If you’ve got £20,000 to invest in an ISA, Bestinvest Plus is an easy way to get a personal recommendation for a Ready-made Portfolio. There is no charge for appointments (usually £240!) booked before 5 April.

To find out more and watch our helpful video, visit bestinvest.co.uk/plus

What about Bestinvest Plus?For those who want professional advice before investing

http://bestinvest.co.uk/ready-made

Tel: +44 (0)20 3553 3229

http://bestinvest.co.uk/plus

Bestinvest writer, Ilena Ilardo, talks to Louie French, our ethical expert, to find out what to do if you are concerned about climate change.

With the focus on climate change really gathering pace over the past year, many people now want to make sure that their investments don’t have a negative impact on the environment or on society. The good news for anyone investing in an ISA is that ESG (Environmental, Social and Governance-related investments), once a niche area of the market, is now mainstream.

A record €120 billion was invested into European sustainable funds in 2019, more than double the €48.8 billion of net inflows gathered in 2018, according to Morningstar. Assets held in the 2,405 funds surveyed by Morningstar reached €668 billion at the end of 2019, up 56% on the previous year, thanks to inflows, market moves and an increase in products.

“When you’re getting into ‘ethical’, ‘green’ and all the various labels, it’s important to know how this ESG data is used and what investment policies are in place. Greenwashing (when a company makes out it is greener than it really is) is a big issue”, clarifies Louie. “That’s why the way we look at investments at Bestinvest is using a green scale: light, mid and dark green, and most of the funds that are featured in our buy list are mid or dark green”.

TRANSITIONING TO RENEWABLESAs the world is transitioning away from fossil fuels, Louie sees renewables, especially wind and solar farms, as a smart choice. “The obvious thing to do from an investor point of view would be to try and avoid various forms of mining, oil extraction, coal, and other industries that have a negative impact on the environment. We now rate Octopus Renewables Infrastructure Trust, which is focused

ISA INVESTMENTS THAT MAKE AN IMPACT


on building and operating a diversified portfolio of renewable energy assets, including solar farms in Italy and the UK and wind farms in Finland”. Octopus Renewables is one of the largest renewable energy investors in Europe and currently manages a global portfolio of renewable energy assets valued at more than £3 billion.

This fund is an investment trust, which means its share price isn’t just a reflection of the value of the assets it holds, but that it also reflects supply and demand for the shares themselves. It’s important to point out that shares for renewable funds often trade at a sizable premium, which can make investing in these funds a challenge.

WHEN GROWTH EQUALS SUSTAINABILITY“There’s more to climate change and ESG investing than just fossil fuels”, explains Louie. “Other popular ISA choices for those who are worried about the environment are the Liontrust UK Ethical fund and the Impax Environmental Markets fund”, says Louie. Both funds include companies that meet primary environmental and social criteria.

Liontrust UK Ethical includes different sized UK companies with strong growth prospects. Its investment process is based on the belief that in a fast-changing world, the companies that will survive and thrive are those which improve people’s quality of life. Its current portfolio holdings include: Kingspan, a company focused on energy efficiency solutions; Softcat, an IT infrastructure company providing digital security; and Smurfit Kappa, which is part of the increasing waste treatment and recycling theme. The fund also excludes direct investments in alcohol, animal testing, fossil fuels, gambling, nuclear, pornography, tobacco and weapons. Liontrust estimates that the portfolio emits 59% less carbon than the MSCI UK benchmark.


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This is not advice to invest. Please note that ethical funds may, by definition, have a limited investment universe; this may affect performance.


OCTOPUS RENEWABLES INFRASTRUCTURE TRUST

Please check current premium/discount before investing.

Ongoing Charges Figure

1.28%

LIONTRUST UK ETHICAL


0.00%Ongoing Charges Figure

0.86%

IMPAX ENVIRONMENTAL

MARKETS

Please check current premium/discount before investing


1.04%

Then we have the Impax Environmental Markets fund, which invests globally in small and medium-sized companies that the manager believes will enable investors to benefit from growth in the markets for cleaner or more efficient delivery of basic services such as energy, water and waste.

The current portfolio holdings include: TOMRA, a Norwegian multinational company focused on recycling and reverse vending; Xylem, a US water technology firm; and Rayonier, a global forest company dedicated to providing sustainable forest management.

HOW ABOUT BESTINVEST’S ETHICAL READY-MADE PORTFOLIO?If you want your ISA investments to help improve the outlook for our planet but you don’t have time to decide where to invest – or perhaps you don’t have the confidence to choose investments yourself – Bestinvest has an Ethical Ready-Made portfolio. Its aim is to invest in companies dedicated to having a positive impact on the world, while avoiding those that have a detrimental effect on society or the environment.

Like all of our Ready-made Portfolios, the investments in the Ethical Ready-made Portfolio are chosen and managed by Tilney’s investment team so you don’t have to make any investment choices yourself.

Find out more at bestinvest.co.uk/ethical-portfolio

http://bestinvest.co.uk/ethical-portfolio


Asia’s time to shine?Asia’s time to shine?Since the financial crisis in 2008, the trend has been that Asia (and Emerging Markets) underperform when compared to the US.

More recently, worries over a slowdown in Chinese growth, the notorious US/China trade war, the strength of the US dollar, and the outbreak of the coronavirus have seen Asian shares pushed to the side. But many think a lot of the companies in the region are undervalued and unappreciated.

We think Asia is a really interesting place for ISA investments. The region is not without its risks, but active managers hunt through the huge continent to find diverse, high-quality companies with strong balance sheets, giving investors the possibility to stash their cash in a fund that works hard for them.

The US/China trade dealEven if you don’t really know what’s going on, there’s a good chance you’ve heard of it – the world’s two largest economies have been in a hostile trade war.

President Trump has encouraged the use of tariffs to remove ‘the deficit in American trade’, even though many economists think it’s a non-issue. He believes China has ‘unfair trading practices’ and has accused them of intellectual property theft (i.e. stealing ideas and inventions from people or companies), whereas China believes he is trying to halt their economic growth.

With America imposing tariffs on billions of dollars of goods, and China retaliating with similar sanctions, tensions rose and stuck around. A ‘phase one’ deal was finally signed in January 2020, but it’s only the beginning of removing tariffs and only remedies the easiest issues. So we’re not out of the woods just yet.

Is 2020 Asia’s year?Nevertheless, 2020 could be Asia’s year. With the possibility of US dollar weakness and depressed valuations (signifying low prices and a lack of buyers) in the Asian market, we could see Asia outperform the US.

Asia is a vast and exciting region to invest in, offering plenty of diversification and opportunities for your ISA. Its wealth and economy is growing (and growing!) outdoing the West, and debt in the region is relatively low. Plus, since Asia’s biggest trading partner is itself, the region benefits from low trade barriers, close proximities and the strengthening economy.

With a vast market, strong companies and the potential for good growth as well as good income investments, Asia looks very promising.Lucy Cowley, Bestinvest Writer


Stewart Asia Pacific LeadersThis fund is run by Stewart Investors veteran, David Gait. As investors go, he’s cautious. He puts capital preservation first and tends to outperform in falling markets because of this, which should give your ISA a bit of a buffer.

Gait’s investments are held for the long term and he encourages his investors to do the same. His portfolio focuses on cash-generative, large-cap companies with a bias to India (and away from China) that aim to grow profits. Gait and his strong analyst team believe that the companies’ senior managers should share the same interests as shareholders, regarding it as the key to good investing.

One of the featured companies is car and tractor manufacturer, Mahindra and Mahindra. The company uses pioneering technology to help people and businesses thrive. It is India’s largest creator of electric vehicles and works on other aspects of technology and sustainability too. ‘Driven by innovation’ (see what they did there?), its Mahindra Susten division is a world leader in solar energy using India’s abundant sunshine. Another company is President Chain Store Corp – mainly comprising the famous 7-ELEVEN convenience stores. Its coffee branch also operates more than 220 licensed Starbucks coffee shops in Taiwan. Double shot soy mochaccino hold the cream, anyone?



Figure

0.88%

Fun fact: Nobody really knows where the word ‘Asia’ comes from. Though

thought to be Greek, there is actually no concrete evidence and

there are suggestions that the word is actually

far older...

Did you know that Samsung – along with their ‘Galaxy’ of wall-sized televisions, foldable tablets and chic phones – manufactures digital heated toilet seats and owns a theme park? Well, now you do!

Martin Lau’s equity fund features this tech titan along with other high-quality IT companies (such as Taiwan Semiconductor – the main chip supplier to Apple and Huawei). At least 80% of the large to mid-cap companies in his fund are in the Asia Pacific region, but there’s some wiggle room for investing up to 20% outside the area (in Asia-focused companies of course) offering some diversity for your ISA.

Lau is a pragmatic fund manager with an absolute-return mind-set, aiming to make money regardless of market conditions. He focuses on growing capital as much as possible, remaining flexible for ever-changing market conditions and keeping away from companies that cost too much.

He has a solid team behind him and a phenomenal track record with 20 years of managing Asia Pacific portfolios under his belt. Plus, heated toilet seats are all in…

First State Asia Focus



Figure

0.90%


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This is not advice to invest.


Top-rated European giants

Our analyst for Europe, Tom White, celebrates the continent’s dynamic businesses. Europe has had some bad press lately. The continent is often portrayed as old-fashioned, and lacking the dynamism of the US or the rapid growth of emerging markets. Stock market numbers seem to reflect this. Over the last five years, the European market is up +56.2%, attractive in its own right but way behind the US market’s +97.9% rise over the same period.

However, dig a little deeper and a different story emerges. The European market has performed broadly in line with emerging markets (+54.6%) and Japan (+70.6%) and much better than the UK (+41.8%), so it’s not that Europe has done badly, it’s that the US has done well. And there are reasons for that.

The US has a far larger weighting to technology than Europe, with the sector making up 23.4% of the MSCI USA index compared to 7.7% for the European index. And the tech sector is flying at the moment – up +172.8% globally over the last five years – so Europe has missed out. And that’s without other tech-related giants like Alphabet (+197.1%), Facebook (+209.6%) and Amazon (+600.8%), which are classified in other sectors. If we strip out the technology element, the bulk of the performance difference disappears – the US is still ahead of Europe, but not by much. Take away the giants of Silicon Valley and Europe has companies just as dynamic as anywhere else in the world.

Here are some of the European companies featured in our rated funds.

Kaiserplatz Square, Frankfurt, Germany.



The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This is not advice to invest. Yields quoted are net. They are not guaranteed and can go down as well as up. Past performance or any yields quoted should not be considered reliable indicators of future returns.

NestléThis famously Swiss company owes its origins to two Americans and a German with a French name. Henri Nestlé was born Heinrich Nestlé but adapted his name to fit in with the locals on moving to a French-speaking part of Switzerland. In 1867 he developed a milk-based baby food and formed a company to sell it: Farine Lactée Henri Nestlé. Elsewhere in Switzerland, brothers Charles and George Page used techniques from their native US to bring condensed milk to the country, forming the Anglo-Swiss Condensed Milk Company in 1866.

The two companies expanded rapidly and were initially fierce rivals, but in 1905 merged to form the somewhat wordy Nestlé and Anglo-Swiss Condensed Milk Company. In 1947 this became Nestlé Alimentana and in 1977 simply Nestlé.

Over the following decades the company expanded through a combination of innovation and acquisition. It released Nescafé instant coffee in 1938, rapidly gaining a following amongst US troops during the Second World War. In 1988 it acquired the UK’s Rowntree Mackintosh, adding the likes of KitKat and Smarties to its portfolio. Moving into this century, the company acquired premium ice cream brand Häagen-Dazs in 2002.

Today Nestlé is the biggest company in Europe and the largest food company in the world. Its stock is as attractive to investors as its brands are to consumers. One reason is its resilience – people keep on buying food and drink, even in a recession. With bond yields currently very low, equities providing similar characteristics to bonds – relatively safe profits combined with consistent dividend payouts – have become highly prized by investors, acquiring the nickname ‘bond proxies’. However, unlike bonds, Nestlé has the added bonus of growth which, whilst not high, is relentless. As the world becomes richer, more and more people are trading up to Nestlé brands.

Nestlé can currently be found in the portfolio of BlackRock Continental European Income, our top-rated fund for income-seeking European investors.

BlackRock Continental European Income

• Invests in large and medium European (ex UK) companies

• ‘Value’ style of investing – predictable income

• Targets high income companies (above £1 billion)



0.92%Yield as at 31 December 2019

3.70%

European Opportunities Trust

• Invest in securities of European companies

• Main holdings in Consumers Goods, Financials and Technology

• Targets capital growth taking into account economic trends

Please check current premium/discountbefore investing.


0.91%


AdidasAdidas started life back in 1924 when brothers Adolf and Rudolf Dassler founded the Dassler Brothers Shoe Factory. The company achieved almost immediate success – German athletes were already wearing its footwear at the 1928 Amsterdam Olympics, while at the 1936 Berlin Olympics legendary US sprinter Jesse Owens ran to gold in Dassler spikes.

In 1949 the two brothers fell out and went their separate ways, with Adolf ‘Adi’ Dassler forming Adidas. Shortly afterwards the company adopted its – now famous – three stripes, and in 1954 the company gained global fame when the West German football team won the World Cup wearing Adidas boots. The boots featured then innovations such as screw-in studs that could be adapted to ground conditions. The company doesn’t just do footwear and clothing: Adidas provided the official football for the 1970 World Cup, and has gone on to do so for every World Cup since.

Adi Dassler passed away in 1978 and though he was succeeded by his wife and son, by the early 1990s Adidas was flirting with bankruptcy. But new management turned the company around and in 1995 it went public for the first time. Since then, Adidas has gone from strength to strength. Today it is the second largest sportswear company in the world. The company benefits from society’s shift from formal to leisurewear, the greater wealth of emerging market consumers and increasingly from its shoes becoming collectors’ items, with limited editions designed by celebrities like Pharrell fetching thousands of pounds in the resale market.

The company is one of the largest holdings in Alexander Darwall’s European Opportunities Trust, our only rated European investment trust.

And for anybody wondering about the other Dassler brother, Rudolf also formed his own sportswear company in 1949, one that remains with us today: Puma. Both companies remain headquartered in the small Bavarian town of Herzogenaurach.

BlackRock European Dynamic is a racier offering than its income-focused stablemate, and literally so in the case of one of its holdings: Ferrari. In stockmarket terms the company is a relative newcomer, listing in 2015, but the business dates back to 1937 when former racing driver, Enzo Ferrari, left Alfa Romeo to start building his own cars. His efforts were put on hold by the war, but when hostilities stopped he started again, building his first car under the Ferrari brand in 1947. It won the Rome Grand Prix the same year.

Ferrari went from strength to strength over the coming decades, becoming the most successful team in Formula 1 history. However, behind the scenes Fiat bought 50% of the company in 1969, increasing this to 90% in 1988; the same year Enzo Ferrari passed away. Ferrari was now a small part of a large company and, whilst it continued its success on the track, behind closed doors its progress stalled.

From 2015-16, Fiat Chrysler spun off its holding, listing it initially on the New York Stock Exchange and later on the Borsa Italiana with the ticker code RACE. This sparked the interest of investors, like BlackRock European Dynamic manager Alister Hibbert. What attracted him is the growth opportunity: Ferrari makes just 9,000 cars a year. No longer being stifled as a small part of a big business gives it significant space to expand without diluting its brand – Porsche, by contrast, makes over 250,000 cars annually. Ferrari is also making its first ever SUV, a significant growth opportunity in China where crowded streets are ill-suited to sports cars.

In the four years since its listing, Ferrari’s share price has gone up fourfold, but Hibbert believes it has even further to go.

Ferrari

These are just some of the companies thriving across Europe today and driving the growth of our rated funds. It’s hard to predict which regions will perform at any given time, which is why we suggest clients maintain diversified equity exposure across the globe. At the moment the US is doing better than Europe, but in the future this could change. In the meantime, the continent still has many attractive investment opportunities for talented fund managers.


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This is not advice to invest.

To invest in our top ISA investment ideas or to open an ISA:

Go to bestinvest.co.uk Call us on 020 3553 3239 Or email [email protected]

Malá Strana Bridge Tower, Prague.


Tel: +44 (0)20 3553 3239


HS2

BUT WHY INVEST NOW?In the UK, the government has pledged to spend more in infrastructure. You only need to cast your eye at the news to see the HS2 rail project connecting London to Birmingham or Mr Johnson’s latest suggestion to build a bridge between Scotland and Northern Ireland. There’s also talk of creating more bus routes and even free ports.

And it isn’t just the UK! Fiscal spending in infrastructure is a worldwide initiative with many major economies expected to increase funding in the sector – particularly in emerging markets. Across the globe, these are big, long-term projects that involve lots of money. But with the current low interest rates, borrowing money is pretty cheap which is helping to fuel the projects.

DEMAND AND DEFENCEIt’s unlikely that demand for new or updated services will fade, meaning the sector can weather plenty of economic storms. For example, in 2018, while stock markets fell, bonds were unpredictable and even ‘safe havens’ were questioned, infrastructure remained strong.

Infrastructure is considered quite a defensive sector, so it could be a good choice for your ISA. Assets in the sector are long-dated, bringing in income over time. They’re also less volatile than equities, for example, which helps during market downturns.

Infrastructure is popular and we have two funds that we think are great options for your ISA and will give you access to infrastructure across the globe: Lazard Global Infrastructure and Utilico Emerging Markets.

Both funds offer a way into this bustling sector that is constantly developing to keep up with our ever-growing population and rapidly advancing tech scene. Sustainability is also an increasingly important theme in infrastructure too, some examples include electric cars powered by the National Grid (featured in our Lazard fund) and sustainable shipping in International Container Terminal Services in Utilico.

On top of all this, the sector acts as a buffer to inflation and can generate a regular income. Good ol’ infrastructure...

CAN INFRASTRUCTURE ACT AS A SHIELD TO INFLATION?Short answer: yes.

Long answer: Most assets and companies in the sector have ‘inflation-linked cash flows’, meaning they can keep up with inflation’s fluctuating rate. For example…

The National Grid: featured in Lazard. Powering the US and the UK and doing so unopposed in its field, which means it can up its prices without dropping demand if necessary.

United Utilities: featured in Lazard. A water company providing NW England with 200 million litres of water a day. The government regulates the price of water (electricity and gas) keeping it in line with inflation and allowing companies to make returns.

Infrastructure is (literally) the foundation of society. It encompasses everything from railways, hospitals, roads and schools, to ‘smart cities’ (which sound like something out of Blade Runner), to using augmented reality to develop airport safety measures or tackle road congestion.

INDESTRUCTIBLE INFRASTRUCTURE


TOMB RAIDERS: Did you know, while digging

down, the National Grid discovered 6th century human skeletons, WWII bombers and Roman remains among other

hidden treasures?

Lucy Cowley, Bestinvest Writer


The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This is not advice to invest. Yields quoted are net. They are not guaranteed and can go up as well as down. Past performance or any yields quoted should not be considered reliable indicators of future returns. Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could both increase and decrease. These investments therefore carry more risk.

HS2

Lazard Global Infrastructure EquityInitial charges through Bestinvest


0.97%


Emerging economies can provide attractive

investment opportunities as they typically have higher growth rates than those in

developed markets

OUR RATED INFRASTRUCTURE FUNDS Lazard aims to achieve total returns that outperform inflation by 5% per year (over a rolling five-year period). Its strong management team targets companies known as ‘preferred infrastructure’ – monopolistic, regulated and with inflation-linked revenue. The portfolio has a 3% yield too – not too shabby.

Utilico invests in infrastructure and utilities in emerging markets.

“Emerging economies can provide attractive investment opportunities as they typically have higher growth rates than those in developed markets”, says Sam Coppin, Head of Tilney’s Investment Advisory Service. But, don’t forget, investing in emerging markets is not without risk.

The fund aims to provide long-term total returns and invests in countries that its board of directors think have political stability, economic progression and a positive outlook on foreign investment. They focus on companies in formerly nationalised industries such as ports, electricity, gas, water and airports. An example is International Container Terminal Services, Inc. – yes, it’s a bit of a mouthful.

ICTSI is a global port operator based in the Philippines. Its ports are efficient and sustainable with 10,000,000 TEUs (think shipping containers) moved yearly across 31 terminals in 18 countries. It also gets involved in solar power projects and tree-planting to name a few.

Another is Rumo SA – a logistics company based in Brazil. It is the biggest railway operator, managing about 14,000km railroads, six port terminals and can store 9,000 tons of soy beans, sugar and the like. Sweet tooth?

Utilico Emerging MarketsPlease check current premium/

discount before investing.


1.14%

Sam Coppin, Head of Tilney’s Investment Advisory Service

To invest in our top ISA investment ideas or to open an ISA:

Go to bestinvest.co.uk Call us on 020 3553 3239 Or email [email protected]


Issued by Tilney Investment Management Services Limited, which is authorised and regulated by the Financial Conduct Authority. Financial services may be provided by other companies in the Tilney Group, further details of which are available at www.bestinvest.co.uk/help/registered-details. © Tilney Group Ltd 2020. BI TISAW 170220 V01/20023964

About BestinvestThrough Bestinvest’s award-winning Online Investment Service, you’ll find everything you need to choose and manage your own investments. You can open an ISA, Self-invested Personal Pension or general investment account and pick from a range of more than 2,500 funds, 100s of investment trusts, ETFs and almost all UK shares. We provide insightful guides, videos and articles to help you. If you’d prefer less involvement with your investments, then the easy option is to pick one of our Ready-made Portfolios. On top of all this, we also have a knowledgeable UK-based telephone team on hand to answer your questions or give you any support you need.

This guide was made using recycled paper. Please be sure to recycle it again once you’ve finished, it could be anything in its next life: a paper plane, a cereal box, part of the next great novel… Stay green.


Tel: +44 (0)20 3553 3239


http://www.bestinvest.co.uk/help/registered-details

Documents

Our Top ISA - Bestinvest€¦ · about opening an ISA or using your allowance, speak to our experts by calling 020 3553 3239 or emailing [email protected] Discover ISA ideas closer