Five funds to watch for 2024 – how have the funds performed?

Artemis Corporate Bond

The fund aims to generate a combination of income and growth over the long term and could form part of a diversified bond portfolio or diversify a share-focused portfolio.

The investment process blends ‘top down’ macro-economic research with ‘bottom up’ fundamental analysis of individual companies’ bonds.

Over the first six months of 2024 Artemis Corporate Bond has performed well, rising 0.65%*.

This is ahead of a broad sterling corporate bond benchmark, which was more or less flat over the period, and also ahead of the sterling corporate bond peer group, the median of which rose 0.55%.

While it’s not been an easy time for bond markets, some of the bonds held by the fund, particularly in the financials and real estate sectors, helped returns in the first half of the period. Of course, past performance isn’t a guide to future returns.

Overall, we still think the fund could be a good choice as part of a portfolio with a long-term view or a portfolio built for income. It should also give some diversification in a portfolio focused on shares. But be aware it could be more volatile than other bond funds.

The fund can use derivatives and invest up to 20% in high-yield bonds, both of which add risk.

Troy Trojan

Rather than trying to shoot the lights out, the fund aims to grow investors’ money steadily over the long run, while limiting losses when markets fall.

The managers have tended to focus on companies based in developed markets, like the US and UK. This includes some of the world’s best-known companies with highly recognisable brands.

Over the six months to the end of June, Troy Trojan returned 3.88%*.

One of the biggest contributors over the period was the fund’s gold holdings. At the end of June the fund had 12.40% invested in gold (through Exchange Traded Funds).

Given the sharp rise in the gold price over the period, this investment has once again proved its worth in the fund. The shares in the fund also generally performed well.

While stock markets have had a great start to the year, we still think it makes sense to have at least one fund in a portfolio with a more defensive mindset.

The diversification from both government bonds and gold has the potential to smooth returns in multiple market environments. And given everything going on in the world right now, it’s not unthinkable stock markets could weaken at some point this year.

We think the fund could form the foundation of a broad investment portfolio, bring some stability to a more adventurous portfolio, or provide some long-term growth potential to a more conservative portfolio.

The manager has the flexibility to invest in smaller companies, which, if used, adds risk. The fund also operates a concentrated portfolio so each investment can contribute significantly to overall returns, which can also increase risk.

Fidelity Global Dividend

Fidelity Global Dividend has the whole global universe to pick from. However, it purposefully invests in companies the manager thinks has predictable revenue streams that can keep growing and provide investors reliable dividends.

A focus on valuations and income means the fund is very exposed to Europe and the UK. This also means it’s typically less exposed to the US market when compared to a global benchmark.

We’re wary of the fund’s overweight in Europe, given the macroeconomic backdrop. But from a valuation point of view the market looks ‘cheap’ compared to its long-term history.

The manager can invest in derivatives and smaller companies which adds risk.

Over the six months to the end of June the fund returned 6.85%. While this was behind the MSCI AC World index return of 12.52%, it was slightly ahead of similar funds in the IA Global Equity Income sector. The average return for these types of funds over the six months was 6.79%.

The main reason for the underperformance relative to the benchmark was the lack of exposure in the US. At the end of May (the latest available data), the fund had under a third invested in the US. This compares to the benchmark with just under 65% in the US.

The fund’s dividend yield is 2.76% (as at 31 May 2024) – but remember, yields are variable and not a reliable indicator of future income.

Given the likelihood of growth slowing in many developed markets, the income this fund provides could help cushion the blow if stock markets do fall.

We expect the fund to perform better than most global funds when markets are falling. However, this fund has typically lagged its global peers when markets have risen.

We think this fund could provide a portfolio with some much-needed shelter and income should markets become volatile. The fund takes charges from capital, which can increase the yield, but reduces the potential for capital growth.

Artemis Income

The fund invests in companies that the managers think can pay a sustainable income through the market cycle, regardless of the economic backdrop. It’s mainly made up of large UK-listed businesses, though there are some holdings in medium-sized and overseas companies too.

The fund has a dividend yield of 3.56% (as of 8 July 2024) – but remember, all yields are variable and not a reliable indicator of future income.

Over the six months to the end of June Artemis Income returned 9.16%*. This isn’t just a great return for six months in absolute terms, but it was ahead of the broader UK market, compared to the FTSE All-Share index, which rose 7.43% in the same time.

Despite its recent good run, the UK is still out of favour with a lot of investors, but we expect it to stay an attractive market for income-seeking investors. It continues to be one of the highest yielding stock markets.

We think the fund could work well alongside other asset classes as part of an income-focused portfolio or could complement other regional equity income funds. The fund takes charges from capital, which can increase the yield, but reduce the potential for capital growth.

iShares Emerging Markets Equity Index

Emerging markets have grown fast in recent decades. As young economies, they tend to offer greater growth opportunities than the west. But this does come with higher investment risk and more volatility.

India and China form a large part of the emerging market universe. In 2023 these two stock markets moved in opposite directions, and by a large amount. 2024 has continued to see quite different performance from these countries.

Over the first six months of the year, the Chinese market rose 5.71%*, while the Indian market rose 18.10%. This only serves to underscore how important asset allocation decisions can be in emerging markets. Fund managers are divided on whether this diversion will continue or reverse.

To reduce the risk of being on the wrong side of this call, we still feel a passive option here could be a good choice for the rest of the year.

iShares Emerging Markets Equity Index invests in a broad spread of companies across emerging countries, like China, India, Brazil, South Africa and Taiwan.

Sector wise, it invests in companies like TSMC, the world’s biggest semiconductor manufacturer and HDFC, one of India’s leading private banks. But some smaller companies do feature which can add risk.

The fund returned 8.93% over the first six months, marginally behind the benchmark.

As a tracker fund, it just aims to track the performance of the broader emerging stock market, instead of trying to outperform it. It’s one of the lowest-cost options to invest in emerging markets and could help boost long-term growth potential – with some volatility along the way though.