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Five fund ideas for 2017

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Important - The value of investments can fall as well as rise, so you could get back less than you invest, especially over the short term. The information shown is not personal advice, if you are unsure of the suitability of an investment for your circumstances please contact us for personal advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).


Richard Troue

Head of Investment Analysis

2016 has been quite a year. Back in March, the most controversial thing to have happened was the suggestion a £200 million polar research ship be named “Boaty McBoatface”. Ultimately, the public vote was overruled and the ship will be named “RRS Sir David Attenborough”.

The voting public did get their way in other, more important, matters though both here and abroad. Britain voted to leave the European Union, the US elected Donald Trump as president, and Italians overwhelmingly rejected constitutional reforms, resulting in their prime minister’s resignation.

Stock markets have, by and large, shrugged off these events and delivered good returns. This hasn’t stopped many investors remaining cautious and sitting on the sidelines with large amounts of cash, however. We feel this could be a mistake and our outlook for 2017 is positive.

With cash and bonds offering little in the way of income, the stock market continues to deliver the potential for higher income and capital growth. The UK economy is in reasonable shape, inflation is relatively low, and we can’t see interest rates rising any time soon. We think any dips in the stock market should be seen as a buying opportunity and expect funds offering attractive variable yields to remain popular. Beyond the UK, there are markets overseas offering exciting growth potential for the more adventurous investor.

Below are five areas we believe could thrive in 2017 and exceptional funds we feel investors should consider. While we expect these themes to perform well next year, it is important to remember investments should be considered for the long term and they will fall as well as rise in value, so you could get back less than you invest.


Investment idea #1

Artemis Income

One of our favourite equity income funds, focusing on cash-generative businesses with the ability to increase dividends.

We have long been advocates of equity income investing and it is a firm favourite with many of our clients. The best companies grow their profits over the years and this allows them to pay higher dividends. Companies able to achieve have tended to see their share price rise too. The combination of a dividend that grows over time and a rising share price can add up to impressive long-term returns.

One of our favourite UK-focused equity income funds is Artemis Income, managed by the experienced Adrian Frost. He invests in high-yielding businesses – companies with robust sales and strong cash flows which should help them maintain dividends over the long term. These contribute significantly to the fund’s attractive 4.2% yield (variable, not a reliable indicator of future income) and include recognised brands such as GlaxoSmithKline, AstraZeneca and Imperial Brands. The fund can also invest in higher risk, high yield bonds.

We rate Adrian Frost and the Artemis UK Equity Income Team highly. They have significant experience managing equity income funds and a long history of strong performance. Anyone who invested £10,000 in the fund ten years ago and took the income would have received over £4,200 back purely in income. What's more, those reinvesting the income in this time would have an investment worth nearly £19,000. Please note that past performance is not a guide to the future.

We believe this fund could be a great long-term holding within an equity income portfolio.

Annual % growth Nov 11-12 Nov 12-13 Nov 13-14 Nov 14-15 Nov 15-16
Artemis Income 16.7 22.2 6.9 3.9 5.0
IA UK Equity Income 14.4 23.6 5.1 5.8 4.5

Source: Lipper IM, 31/12/06 - 30/11/16. Figures with income reinvested.

Past performance is not a guide to future returns

Fund information

Investment goal: Income
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.79% p.a.
Ongoing saving from HL: 0.09% p.a.
Net Ongoing charge: 0.70% p.a.
Vantage Service Charge: 0.45% p.a.

View Fund Key Investor Information Document

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Artemis Income

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Investment idea #2

HL Select UK Shares

Aiming for long-term sustainable growth, investing in companies that have potential to survive through thick and thin.

With Brexit on the horizon, well-managed and cash-generative businesses that have the potential to survive through thick and thin should appeal to investors. These are often not the most exciting businesses, but this is part of their appeal – the ability to deliver sustainable long-term growth.

Steve Clayton and Charlie Huggins, managers of the recently launched HL Select UK Shares Fund, look for exactly this type of business. They believe companies with exceptional products and services can create a virtuous circle of customer loyalty, pricing power and financial strength that allows them to prosper and grow whichever way the economic winds are blowing. Investments can still fall in value, however, so you could get back less than you invest.

The managers will invest in a concentrated portfolio of around 30 large, medium and higher risk smaller companies. This means each holding can make a real difference to performance, although it is a higher risk approach.

The managers’ style is designed to help reduce risk by focusing on quality and financial strength in the shares they invest in. They look for companies they believe are able to make a high return on the cash they reinvest. Those that do this consistently should demonstrate robust growth over the long term, although there are no guarantees. We believe investors who share this philosophy will ultimately be rewarded.

The HL Select UK Shares fund is run by our sister company Hargreaves Lansdown Fund Managers Ltd.

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Net Ongoing charge: 0.60% p.a.
Vantage Service Charge: 0.45% p.a.

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Investment idea #3

Jupiter India

An experienced manager looking to tap into the potential of the world’s fastest growing major economy.

While the UK is home to many high quality, cash-generative businesses, investors should aim to diversify by looking at exciting opportunities overseas in 2017. India is the world’s fastest growing major economy and, we feel, currently offers tremendous potential.

The country elected pro-business candidate Narendra Modi as its prime minister in 2014 and is in the midst of change. His government aims to streamline India’s business environment and lift hundreds of millions out of poverty.

Revolutionising the world’s second-most populated country will not occur overnight, however. Implementing economic and political reform will take time. Yet India is emerging as a bright spot in the developing world. Indian companies are supported by a young and educated workforce, and an increasingly affluent population is spending more on consumer goods and services. The country is also taking its place as an IT and engineering powerhouse.

The Jupiter India Fund is our favoured way to access India’s exciting growth potential. It is managed by Avinash Vazirani, one of the industry’s few specialist Indian equities investors with an impressive 20 year track record of superb stock picking. Since this fund’s launch in February 2008 it has delivered 149% growth compared with 62% for the FTSE India Index. Past performance is not a guide to the future.

While the longer-term prospects look promising, the fund can fall as well as rise in value so investors could get back less than they invest. A long time horizon is therefore essential for investing in this higher-risk region and as such we would only suggest allocating a small portion of a portfolio to this area.

Annual % growth Nov 11-12 Nov 12-13 Nov 13-14 Nov 14-15 Nov 15-16
Jupiter India 10.9 -16.2 59.4 8.6 25.7
FTSE India 14.3 -9.7 47.5 -7.1 24.7

Source: Lipper IM, 29/02/08 - 30/11/16

Past performance is not a guide to future returns

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 1.06% p.a.
Ongoing saving from HL: 0.37% p.a.
Net ongoing charge: 0.69% p.a.
Vantage Service Charge: 0.45% p.a.

View Key Investor Information Document

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Jupiter India

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Investment idea #4

BlackRock Emerging Markets Equity Tracker

A low cost option for investors seeking broad exposure to the exciting growth prospects of higher risk emerging markets.

Among higher risk emerging markets, it is not just India that shows promise. We are positive on the prospect for emerging markets as a whole. The emerging markets are a diverse range of economies, stretching from Asia and Eastern Europe to South Africa and Latin America. Some are rich in commodities and natural resources; some are reliant on exporting goods to Western economies; and others have a vibrant consumer-driven economy.

After a period in the doldrums, our analysis suggested emerging markets started to look attractively valued at the end of 2015. We have regularly highlighted this to our clients since. While stock markets have bounced strongly in 2016, we believe there is much further to go.

History has shown investing when valuations are low can lead to excellent long-term returns and for patient investors we see an excellent opportunity. However, there are no guarantees as a market which is cheap can stay cheap for some time, and even get cheaper still.

The BlackRock Emerging Markets Equity Tracker is our favoured choice for investors who seek low-cost, broad exposure to emerging markets. It tracks the performance of the FTSE All-World Emerging index by investing in every stock in the index. This ensures wide diversification and ensures it tracks as accurately as possible.

Annual % growth Nov 11-12 Nov 12-13 Nov 13-14 Nov 14-15 Nov 15-16
BlackRock Emerging Markets Equity Tracker 9.5 0.3 9.7 -14.5 31.1

Source: Lipper IM, 30/11/11 - 30/11/16

Past performance is not a guide to future returns

Fund information

Investment goal: Growth
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.25% p.a.
Ongoing saving from HL: 0.02% p.a.
Net ongoing charge: 0.23% p.a.
Vantage Service Charge: 0.45% p.a.

View Key Investor Information Document

View our charges

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BlackRock Emerging Markets Equity Tracker

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Investment idea #5

Newton Global Income

A global income fund investing in companies with consistent cash flows and strong balance sheets.

Finally, there are also opportunities overseas for investors who seek income. This brings with it the added benefit of diversification across different countries and sectors, a larger pool of dividend-paying companies, and exposure to different currencies. This reduces reliance on the UK and could help smooth out overall performance.

Nick Clay and his team, managers of the Newton Global Income Fund, identify themes they expect to drive stock market and company fortunes. These themes evolve over time allowing them to benefit from changing market conditions.

The current view of the team is that the world has become over-indebted, hence seeking to reduce debt is a natural consequence. Therefore, the current focus is on large, well-financed, defensive businesses, particularly in the healthcare, tobacco, and consumer goods sectors. The managers operate a concentrated portfolio, which allows each holding to have a significant impact on performance, but it is a higher risk approach. The fund also invests in smaller companies which adds risk.

The fund has performed well over the past year, in part because a fall in the value of sterling boosted returns on overseas investments. This highlights perfectly the benefits of maintaining a geographically diversified portfolio. Investments can still fall as well as rise, however, so investors could get back less than they invest and past performance is not a guide to future returns.

We are excited for the short and long-term prospects of this fund and believe it offers a great choice for those seeking exposure to income opportunities across the globe.

Annual % growth Nov 11-12 Nov 12-13 Nov 13-14 Nov 14-15 Nov 15-16
Newton Global Income 15.6 13.7 11.0 6.9 29.0
IA Global Equity Income 13.2 19.4 8.4 0.7 20.6

Source: Lipper IM, 30/11/15 - 30/11/16

Past performance is not a guide to future returns

Fund information

Investment goal: Income
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.69% p.a.
Ongoing saving from HL: 0.14% p.a.
Net ongoing charge: 0.55% p.a.
Vantage Service Charge: 0.45% p.a.

View Key Investor Information Document

View our charges

The fund's charges are taken from capital which can increase the yield, but reduce the potential for capital growth.

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Newton Global Income

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Artemis Income

Important: Investments can go down in value as well as up, so you might get back less than you invest. The value of tax savings will depend on your circumstances and tax rules can change over time. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).

Please read the Vantage Key Features, Terms & Conditions and Fund Key Investor Information Document.

Choose a unit type Choose a fund type

Open and invest in a new account

Stocks & Shares ISA

  • Save tax - no capital gains tax and no further UK tax to pay on income from your investments
  • Access your money at any time
  • Invest with a financially secure, FTSE 100 company

The maximum you can invest into an ISA in this tax year 2016/2017 is £15,240. Tax rules can change and the value of any benefits depends on individual circumstances.

Invest in an ISA

SIPP (Self Invested Personal Pension)

  • Award-winning pension with wide investment choice.
Invest in a SIPP

Fund & Share Account

  • Invest outside an ISA or pension with no investment limits.
Invest in an account

Invest in an existing account

You can place a deal online now or top up an existing account first, using your debit card.

HL Select UK Shares

Important: Investments can go down in value as well as up, so you might get back less than you invest. The value of tax savings will depend on your circumstances and tax rules can change over time. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).

Please read the Vantage Key Features, Terms & Conditions and Key Investor Information Document.

Choose a unit type Choose a fund type

Open and invest in a new account

Stocks & Shares ISA

  • Save tax - no capital gains tax and no further tax to pay on income from your investments
  • Access your money at any time
  • Invest with a financially secure, FTSE 100 company

The maximum you can invest into an ISA in this tax year 2016/2017 is £15,240. Tax rules can change and the value of any benefits depends on individual circumstances.

Invest in an ISA

SIPP (Self Invested Personal Pension)

  • Award-winning pension with wide investment choice.
Invest in a SIPP

Fund & Share Account

  • Invest outside an ISA or pension with no investment limits.
Invest in an account

Invest in an existing account

You can place a deal online now or top up an existing account first, using your debit card.

Jupiter India

Important: Investments can go down in value as well as up, so you might get back less than you invest. The value of tax savings will depend on your circumstances and tax rules can change over time. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).

Please read the Vantage Key Features, Terms & Conditions and Key Investor Information Document.

Choose a unit type Choose a fund type

Open and invest in a new account

Stocks & Shares ISA

  • Save tax - no capital gains tax and no further tax to pay on income from your investments
  • Access your money at any time
  • Invest with a financially secure, FTSE 100 company

The maximum you can invest into an ISA in this tax year 2016/2017 is £15,240. Tax rules can change and the value of any benefits depends on individual circumstances.

Invest in an ISA

SIPP (Self Invested Personal Pension)

  • Award-winning pension with wide investment choice.
Invest in a SIPP

Fund & Share Account

  • Invest outside an ISA or pension with no investment limits.
Invest in an account

Invest in an existing account

You can place a deal online now or top up an existing account first, using your debit card.

BlackRock Emerging Markets Equity Tracker

Important: Investments can go down in value as well as up, so you might get back less than you invest. The value of tax savings will depend on your circumstances and tax rules can change over time. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).

Please read the Vantage Key Features, Terms & Conditions and Key Investor Information Document.

Choose a unit type Choose a fund type

Open and invest in a new account

Stocks & Shares ISA

  • Save tax - no capital gains tax and no further tax to pay on income from your investments
  • Access your money at any time
  • Invest with a financially secure, FTSE 100 company

The maximum you can invest into an ISA in this tax year 2016/2017 is £15,240. Tax rules can change and the value of any benefits depends on individual circumstances.

Invest in an ISA

SIPP (Self Invested Personal Pension)

  • Award-winning pension with wide investment choice.
Invest in a SIPP

Fund & Share Account

  • Invest outside an ISA or pension with no investment limits.
Invest in an account

Invest in an existing account

You can place a deal online now or top up an existing account first, using your debit card.

Newton Global Income

Important: Investments can go down in value as well as up, so you might get back less than you invest. The value of tax savings will depend on your circumstances and tax rules can change over time. If you are unsure of the suitability of any investment for your circumstances please contact us for advice. Once held in a SIPP money is not usually accessible until age 55 (rising to 57 in 2028).

Please read the Vantage Key Features, Terms & Conditions and Key Investor Information Document.

Choose a unit type Choose a fund type

Open and invest in a new account

Stocks & Shares ISA

  • Save tax - no capital gains tax and no further tax to pay on income from your investments
  • Access your money at any time
  • Invest with a financially secure, FTSE 100 company

The maximum you can invest into an ISA in this tax year 2016/2017 is £15,240. Tax rules can change and the value of any benefits depends on individual circumstances.

Invest in an ISA

SIPP (Self Invested Personal Pension)

  • Award-winning pension with wide investment choice.
Invest in a SIPP

Fund & Share Account

  • Invest outside an ISA or pension with no investment limits.
Invest in an account

Invest in an existing account

You can place a deal online now or top up an existing account first, using your debit card.