How to grow your wealth: Investment funds

Economic growth is likely to remain elusive in the UK, writes Faith Glasgow. But there are pockets of opportunity in the UK and internationally, where canny fund managers free to follow their hunches can produce decent returns.

Our panel of financial advisers, which also provides a selection of investment trust suggestions, gives us its five best ideas for growth-oriented investors.

Neptune Global Equity

Price 256.5p Yield 0.1% TER 2%

Patrick Connolly, spokesperson for AWD Chase de Vere, picks this fund from a investment house well known for its thematic, ideas-driven approach. It has been managed by Robin Geffen for 10 years and has established a strong track record over that time: three-year performance is top-quartile in the IMA global sector.

"Geffen has complete geographical flexibility, making this effectively a Neptune global best ideas fund," says Connolly.

He acknowledges that Geffen's flexible approach means performance can be volatile: a belief that emerging markets will outperform in the longer term has resulted in fourth-quartile performance over the past year, as emerging markets have not had a happy time.

However, he says: "For those willing to take risks, this fund should perform well in the medium term."

Rathbone Global Opportunities

Price 61.8p Yield Nil TER 1.56%

"One of our favoured growth funds is Rathbone Global Opportunities, which provides exposure to global companies, including UK companies but excluding emerging markets ones" says Darius McDermott, managing director at Chelsea Financial Services. It has an exceptional track record under manager James Thomson, having delivered first-quartile performance over one, three and five years.

The fund looks for growth companies that are easy to understand in industries with high barriers to entry and are 'scaleable' - able to grow their business without adding significantly to the cost base.

One such scaleable business is internet property company Rightmove (RMV), the largest holding in the portfolio.

M&G Global Basics

Price 624.7p Yield 0.1% TER 1.67%

Although he is reluctant to recommend any growth fund as a short-term fix, given the likely state of the economy over the next 12 months, Melvyn Bell, investment manager at Lowes Financial Management, believes M&G Global Basics taps into a long-term global trend in the shape of population dynamics.

He says: "The world's population is growing, and an increasingly large proportion of it is becoming more affluent and consuming more Western-style products."

For more on how population growth and age structure can affect investors, read: Why demographic data is important.

Under Graham French's respected management, the M&G fund invests in the raw materials, processors and global retailers and distributors likely to benefit from rising consumer demand.

"Of course, commodities can be volatile, and that means the fund's performance can be unpredictable. But over the longer term, these companies will gain value, especially if they have a global presence." The fund has achieved first-quartile three-year returns, up 70% over that period.

Jupiter Merlin Growth Portfolio

Price 226.4p Yield Nil TER 2.57%

Martin Bamford, an independent financial adviser at Informed Choice, focuses primarily on asset allocation in creating client portfolios. "We would tend to recommend a portfolio of different single-asset-class funds for growth investors, as this delivers greater asset allocation control" he says.

The Jupiter portfolios are funds of funds. The growth version invests across a variety of investment asset classes to achieve long-term capital growth. "The Jupiter Merlin team is recognised as one of the best in this space. The fund has delivered above-average returns over one, three and five years," says Bamford.

Liontrust Special Situations

Price 180.3p Yield 0.5% TER 1.94%

Philippa Gee, managing director of Philippa Gee Wealth Management, is a fan of the Liontrust Special Situations fund, managed by Anthony Cross. The fund uses Liontrust's special investment process to select a concentrated portfolio of multi-size UK companies with distinctive, intangible strengths that competitors struggle to reproduce.

Gee says: "Cross's fund has done well in the challenging investment climate of the past three years." Over three years, it has more than doubled in value, while the All-Share has returned 43%. It tops the UK all companies sector over one year and is ranked sixth out of 278 funds over three.

Funds with Interactive Investor. Invest within different sectors such as commodities, or in industry-based sectors such as technology or the pharmaceutical industry with our fund filter.

The yields quoted are data provider Lipper's projected yield figures, which are usually lower than those quoted on fact sheets. TERs do not include performance fees.

This article was taken from the January 2012 issue of Money Observer.