Buying into actively-managed investment funds can be a great way to build wealth over the long run. With these investments your funds are pooled together with the money from other investors and then spread over many different stocks by a professional manager. The end result is diversified exposure to the stock market at a relatively low cost.
Here, I’m going to highlight nine top funds I like for 2022 and beyond. All of these products have good performance track records so I’d be comfortable buying them for my own investment portfolio today.
My top UK equity funds for 2022
Starting with UK-focused products, one of my top picks is Royal London Sustainable Leaders. This fund has an ethical focus (it aims to invest in companies making a positive contribution to society) and I see it as a great ‘core holding’. At the end of October, top holdings included Prudential, Experian, and Astrazeneca.
In terms of performance, this fund delivered a return of 12.1% per year for the five years to the end of October. By contrast, the FTSE All-Share index returned 4.6% per year over that period. This shows that long-term investors like myself can invest responsibly without having to sacrifice financial returns.
In the UK growth fund space, I like Slater Growth. This is run by Mark Slater, who is considered to be one of the UK’s top stock pickers. Slater’s aim is to invest in shares which he believes are undervalued and that have the potential for a significant rerating.
At the end of November, top holdings included Future, Prudential, and Next Fifteen. Zooming in on performance, the long-term returns here have been excellent. Over the five years to the end of November, the fund delivered a return of around 106%.
In the UK small-cap space I like ASI Smaller Companies. This fund aims to generate long-term growth by employing a strategy that combines growth, quality, and momentum approaches to investing. At the end of last month, top holdings included Kainos, Gamma Communications, and Impax Asset Management. Over the five years to the end of November, it returned about 16.5% per year after fees, which was well ahead of its benchmark.
Finally, in the UK equity income space, I like the TB Evenlode Income fund. This is an income-focused fund that predominantly invests in high-quality UK businesses (it’s allowed to invest a small proportion of its capital internationally). Top holdings at the end of November included Unilever, Diageo, and Sage. Over the five-year period to the end of November, it returned 55%, which is very good for an equity income fund. In terms of income, the dividend yield here is currently about 2.4%.
Global equity funds for 2022
Moving on to global equity funds, one of my top picks for 2022 is Fundsmith. This fund, which is managed by Terry Smith, is one of the most popular equity funds in the UK, and it’s not hard to see why. Since its launch in late 2010, it has delivered a return of about 18% per year, which is phenomenal.
What I like about Fundsmith is that Smith has a very simple approach to investing. All he does is pick great companies and hold them for the long run. It’s a straightforward, Warren Buffett-like approach to investing that works. At 30 November, top holdings included Microsoft, Intuit, and Estée Lauder.
Another global equity fund I hold in high regard is Blue Whale Growth. This is a concentrated growth-focused fund run by Stephen Yiu. This product was only launched in 2017 so it doesn’t have the kind of long-term track record that Fundsmith has. However, since its launch, it has delivered very strong returns (20.8% per year to the end of November), outperforming most funds in its category.
Like Smith, Yiu has a straightforward approach to investing. He simply invests in high-quality growth companies that are trading at attractive valuations. Looking at the performance here, this approach certainly seems to work for the portfolio manager. At the end of November, top holdings included Microsoft, Alphabet, and Adobe.
US equities
Turning to the US, which has been a popular destination for UK investors’ capital in recent years, I like Baillie Gifford American. This is a growth-focused product with an excellent performance track record. Over the five years to the end of November, it generated a return of 34% per year. Top holdings at the end last month included Shopify, Tesla, and Moderna.
Technology funds for 2022
Finally, I think it’s worth highlighting some top technology funds. After all, we are in the midst of a tech revolution.
For a core technology holding, I like Fidelity Global Technology. This is a fairly vanilla tech fund that contains exposure to a lot of the big tech names including Microsoft, Apple, and Amazon. Performance here recently has been solid. Over the last five years, it has returned about 27% per year.
For a more niche technology play, I like Sanlam Artificial Intelligence. This is focused on companies that are active in the artificial intelligence (AI) space. At the end of October, top holdings included Alphabet, Upstart, and Keyence. It’s worth pointing out that this fund was only launched in 2017, so it doesn’t have a long-term track record. However, performance since inception has been very strong (28% per year to the end of October).
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The risks of investing in funds
It’s worth pointing out that all of these funds have their own unique risks. For example, the UK funds could underperform if the country’s economy struggles.
Similarly, the tech funds could underperform if these stocks fall out of favour. Some of the funds, such as Fundsmith and Blue Whale, are also quite concentrated in nature, meaning they have a higher level of stock-specific risk relative to more diversified funds. As always, past performance is not an indicator of future returns.
I’m comfortable with these risks however. I think all of these funds could play a valuable role in my diversified portfolio in 2022.
