Revealed: how experts' top investment picks have really performed

Every year, experts line up to tell you which stocks and funds are set to be the big risers. So we went back and analysed how these hot picks have actually performed.

How experts identify their top investments

For investors it’s the ultimate in crystal ball gazing: picking the investment funds that will produce bumper returns.

Choose correctly and you can look forward to double-digit returns.

But pick the wrong portfolios and you could lose every penny.

Of course, there is no shortage of experts keen to highlight which managers they believe are destined for greatness.

At the end of December – and again in the run-up to ISA season – they compile lists of favoured funds that are worth considering.

Their predictions will be based on a variety of factors.

Some focus on managers with excellent track records in various market conditions, while others favour those whose funds are exposed to fast-growing sectors or countries with strong economic backdrops.

However, the reality is it’s virtually impossible to make such calls with any degree of certainty or comfort.

The sheer number of stock, sector, economic and political variables is too vast for anything resembling accuracy.

Of course, you only need look at the disastrous Woodford Equity Income to see how even professional fund managers can get it wrong.

Its manager, Neil Woodford, was once a celebrated name but has suffered a spectacular fall from grace.

Our look at how funds tipped for success over the past one, five and 10 years have fared illustrates how performances can vary.

While some have returned strong figures, others have achieved significantly less than their peers for a wide variety of reasons.

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How last year’s top tips performed

The obvious caveat is that one year is an absurdly short timeframe for an investment fund to deliver.

If you’re putting money into a portfolio you need to be investing for a minimum of five to 10 years.

Anything less and you’re at the mercy of a volatile stock market.

At the start of 2019, Baillie Gifford Emerging Markets Growth, Merian UK Mid Cap, Schroder Recovery, Hermes Global Emerging Markets and Jupiter Absolute Return were all being tipped by the gurus.

As you can see below, performances have been mixed.

Baillie Gifford Emerging Markets Growth

Its aim is to outperform the MSCI Emerging Markets Index by at least 2% per annum over rolling five-year periods.

The fund invests in an actively managed portfolio of emerging market stocks.

This currently includes names such as Samsung Electronics; Tencent, which is China’s biggest gaming and social media company; and Brazil oil giant, Petrobras.

Return: 12.6%

Sector average: 8.1%

Merian UK Mid Cap fund

The fund’s aim is to achieve capital growth by primarily investing in a portfolio of medium sized UK companies.

In seeking to achieve its investment objective, the fund will aim to deliver a return, net of fees, greater than that of the FTSE 250 ex Investment Trust Index over rolling three year -periods.

Return: 14.8%

Sector average: 12.4%

Schroder Recovery

Return: 0.7%

Sector average: 12.4%

Hermes Global Emerging Markets

Return: 12.6%

Sector average: 8.1%

Jupiter Absolute Return

Return: -3.9%

Sector average: N/A

*Data according to Morningstar Direct for the past year to November 30^th, 2019.

The actual best performers over the past year

So which funds have been the stand-out performers over the past year?

Well, it’s generally been gold-related funds, according to Morningstar Direct data to

HC Charteris Gold and Precious Metals

The Fund primarily invests in instruments with direct underlying gold and/or precious metals exposure and shares in companies world-wide whose core business is involved in the mining, refining, production and marketing of gold and/or precious metals

Return: 52.1%

LF Ruffer Gold

The fund aims to achieve capital growth over the long term by principally investing in gold and precious metal-related companies within the mining industry.

At present, its holdings include Centerra Gold, Kinross Gold and Westgold Resources.

Return: 40.8%

Investec Global Gold

Return: 39.2%

BlackRock Gold and General

Return: 35.2%

Wellington FinTech S USD Unhedged

Return: 34.2%

*Data according to Morningstar Direct for the past year to November 30^th, 2019.

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How funds tipped five years ago performed

Five years is still not long enough in the view of many people but at least it’s a better timeframe over which to form a judgement.

At the very least you’ll have an idea if the portfolio manager has any prospect of making you money.

Back at the end of 2014, Invesco Perpetual US Equity, Woodford Equity Income, BlackRock Continental European Income, Liontrust European Opportunities and Janus Henderson UK Absolute Return were being heavily tipped.

All bar one of those would have made you money – although some delivered less than the sector average.

However, the Woodford Equity Income has been a disaster, with investors withdrawing their money after poor performance. The fund is now being wound up.

Invesco Perpetual US Equity

Return: 52.5%

Sector average: 86.5%

BlackRock Continental European Income

Return: 57.8%

Sector average: 51.6%

Liontrust European Opportunities

Return: 31.8%

Sector average: 51.6%

Janus Henderson UK Absolute Return

Return: 14.3%

Sector average: NA

Woodford Equity Income

Return: -22.7%

Sector average: NA

*Data according to Morningstar Direct for the past five years to November 30^th, 2019.

The best performers over the past five years

These have been the best performing funds – across all sectors – over the past five years, according to Morningstar Direct.

Legg Mason IF Japan Equity

The aim of this fund is to achieve capital growth through investing in the securities of Japanese companies.

The investment process seeks to identify high growth companies by looking at companies with annual earnings growth in excess of 20% but which are attractively valued in the opinion of the investment manager.

Return: 190.6%

Polar Capital Global Technology

The fund aims to achieve long-term capital appreciation through investing in a globally-diversified portfolio of technology companies.

The team consists of nine sector specialists with combined industry experience of more than 130 years. Its holdings include Apple, Microsoft, Alphabet and Facebook.

Return: 184%

Fidelity Global Technology

Return: 175.9%

MS INVF Global Opportunity

Return: 165.2%

Baillie Gifford American

Return: 164.8%

*Data according to Morningstar Direct for the past five years to November 30^th, 2019.

The best performers over the past decade

A decade ago is generally regarded as a decent amount of time over which to judge whether an investment has been a success.

Of course, many things can go right – and wrong – over the course of 10 years.

At the beginning of 2010, people were tipping funds in a number of different areas, including Asia, corporate bonds and income funds.

Since then we have been through a number of different economic backdrops and had changes of government around the world.

Stewart Investors Asia Pacific Leaders

The fund invests in shares of companies that are based in – or have significant operations within – the Asia Pacific region, including Australia and New Zealand.

The fund invests in both large and medium-sized companies.

Return: 172.52%

Sector average: NA

Artemis Income

This fund aims to provide investors with a steady and growing income, along with long-term capital growth.

It mainly focuses on UK-listed companies and prefers stable, well established businesses with the financial strength to pay solid dividends to their shareholders.

Return: 132.13%

Sector average: 126.78%

Jupiter Financial Opportunities

Return: 89.28%

Sector average: NA

Schroder UK Dynamic Absolute Return

Return: 86.82%

Sector average: NA

Invesco Corporate Bond

Return: 61.24%

Sector average: 70.43%

*Data according to Morningstar Direct for the past 10 years to November 30^th, 2019.

The best performers over the past 10 years

The best performers over the past 10 years

These have been the best performing funds – across all sectors – over the past 10 years, according to Morningstar Direct.

As you can see, the top five are a mix of Japanese, biotechnology, health, US and technology portfolios.

Legg Mason IF Japan Equity

Return: 664.74%

Candriam Equities L Biotechnology

Return: 536.60%

Polar Capital Global Technology

Return: 494.74%

GAM Multistock Health Innovation Equity

Return: 494.68%

Vanguard US Opportunities Ins

Return: 472.09%

How to treat predictions

Fund predictions are no more than one person’s assessment of which areas and approaches could possibly do well.

Therefore, treat them with extreme caution, warns Patrick Connolly, a chartered financial planner at Chase de Vere.

“Nobody knows what will happen in the future, so the best approach is to set up your finances so that you can achieve your goals regardless,” he says.

Flexibility and diversification are key.

“If you position your finances assuming something is going to happen, then you could put your future lifestyle in jeopardy if everything doesn’t turn out as you expected,” he adds.

Adrian Lowcock, head of personal investing at Willis Owen, agrees.

“The best prediction to follow is that in the short term, markets can go down as well as up,” he says.

“Nothing goes up forever and trends come to an end, so be diversified.”

Which funds have been popular this year?

Funds within the IA Global and IA Strategic Bond sectors have been very popular this year, according to Investment Association statistics.

Conversely, the IA Targeted Absolute Return sector has been the worst selling, while IA UK All Companies appeared to fall out of favour during the summer months.

Global funds were in demand as investors avoided the UK due to the political and economic uncertainty, according to Adrian Lowcock, head of personal investing at Willis Owen.

“The most popular managers are those who have had excellent track records of performance over recent years and are riding high,” he explains.

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Fund picks for the future

We asked a handful of those in the know to pick the funds they think will prove profitable in the coming years.

Tom Stevenson, investment director for personal investing at Fidelity International, recommends:

Artemis Global Emerging Markets Fund

“The manager’s approach is to find shares with good growth prospects, attractive valuations and a catalyst for a future upward re-rating.

“This is a well-diversified fund, which eliminates some of the company-specific risk that can often hurt the performance of an emerging market fund.”

Liontrust UK Growth Fund

“It looks for companies with pricing power, the ability to charge a little bit more, which in turn leads to high and sustainable profits.

“This looks like a solid way to play the UK market in a year when it is unclear whether the value or growth styles will dominate.”

Adrian Lowcock, head of personal investing at Willis Owen, emphasises his picks are for the longer-term:

Man GLG Japan CoreAlpha

“Stephen Harker is a contrarian investor, looking for companies that are deeply out of favour with investors.

“Focusing on the largest 300 listed companies in Japan, he identifies those that appear significantly undervalued when compared with their competitors.”

Man GLG UK Income

“This fund offers a highly disciplined approach to investing in UK equity income.

“Manager Henry Dixon’s proven value style underpins his philosophy that pricing inefficiencies can be profitably exploited.”

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Ben Willis, head of portfolio management at Chase de Vere, recommends:

Man GLG Undervalued Assets

“It’s a UK value focused fund with a bias towards mid-caps.

“Until recently value investing has been firmly out of favour but recent progress on Brexit has seen investors start returning to the UK equities, which are under-owned and trading on relatively attractive valuations.”

HSBC American Index

“If equity markets are to do well in 2020, then it will be the US leading the charge.

“The US is a very efficient market and notoriously difficult to outperform consistently.

“As such, the HSBC fund represents a cost-efficient way of gaining exposure to the S&P 500.”

The information included in this article does not constitute regulated financial advice. You should seek out independent, professional financial advice before making an investment decision.