Media Centre

19th March 2016
How the Experts Invest their ISAs

the times in article

Wondering how to use your allowance? Mark Atherton gets the insiders’ tips.

Choosing a home for your £15,240 individual savings account (Isa) allowance before the April 5 deadline is never easy. It would be easier if you knew what the experts select for their portfolios? Well, Times Money has asked them that very question. Here are their responses.

Juliet Schooling Latter, of Chelsea Financial Services

“I have split my money four ways. Earlier in the tax year I put a quarter of my allowance into CF Woodford Equity Income and another quarter into Fundsmith Equity. They are both funds I trust, especially when markets are volatile. The managers — Neil Woodford and Terry Smith — are both safe pairs of hands and have historically done well in tough market conditions.

“More recently I put another quarter of my allowance into Somerset Emerging Markets Dividend Growth fund and a similar amount into the JO Hambro Asia ex-Japan Small and Mid-cap fund. Emerging markets and Asia are worth a punt at this stage, though they could go lower still.”

Danny Cox, of Hargreaves Lansdown

“As someone who believes in being optimistic when others are fearful, I have divided my money between a European fund and a global equity fund. My first choice is Hargreaves Lansdown’s own Multi-Manager European fund. I chose this as I know the team and it has a great track record of picking good managers. Also by choosing a multi-manager fund I don’t have to monitor it as tightly as a single fund, as the managers should be checking, and where necessary, changing the portfolio.

“The Fundsmith Equity fund is my chosen global fund. Terry Smith has a good track record and I already hold another manager in this sector so wanted to complement my existing holding.

“I always try to use my Isa allowance at the start of the tax year to make the best of the tax-sheltered time available.”

Jason Hollands, of Tilney Bestinvest

“I have been relatively cautiously positioned over the past year and this is reflected in my Isa holdings, which are 75 per cent equities,15 per cent absolute return funds and 10 per cent cash. I also stick to a discipline of not holding more than 20 funds in my overall Isa portfolio. This means that if I want to invest in another fund I have to decide which of my existing funds I am prepared to sell.

“My most recent investments have been into FP Argonaut Absolute Return, Jupiter European and JO Hambro UK Opportunities. The Argonaut fund aims to back companies with the potential to deliver positive earnings surprises, such as the budget airline Ryanair, and Pandora, the Danish jewellery firm. On the negative side it takes ‘short’ positions in certain companies, such as Standard Chartered bank, and will benefit if their share price falls.

“Jupiter European invests in our favourite developed market and holds a concentrated portfolio of high-quality growth companies, including Novo Nordisk, the global healthcare company, RELX, the data provider, and Syngenta, the agricultural feed producer.

“JO Hambro UK Opportunities, run by John Wood, focuses on quality growth stocks and the manager has a strong belief in protecting capital. The fund currently has 16 per cent in cash.”

Hannah Edwards, of BRI Wealth Management

“This year I have gone for four investments in my Isa. The first is CF Woodford Equity Income fund, which has produced very good performance since its launch in 2014. It combines holdings in large companies with solid business models, such as AstraZeneca, with stakes in much smaller companies that have strong growth potential.

“I have also chosen CF Miton Multi-Cap Income fund, run by Gervais Williams. Williams favours smaller companies that are on cheaper valuations and less exposed to global economic headwinds. To refine his search for good stocks Williams adopts a ‘traffic light’ approach that weeds out companies that don’t meet strict balance sheet, earnings and growth criteria.

“GCP Infrastructure Investments trust, my third choice, offers a steady income stream and a yield of 6.55 per cent from a combination of solar, wind and biomass operations as well as projects financed by the private finance initiative.

“Finally, I have gone for Aviva’s Multi-Strategy Target Income fund. It aims to provide investors with a regular monthly income in all market conditions, as well as offering a degree of capital protection.”

Anna Sofat, of Addidi

“My Isa is invested in a portfolio run by my company. We have two basic portfolios — a risk portfolio and a defensive portfolio – and investors decide what combination of the two they want. At the moment I am going for 60 per cent in the risk portfolio and 40 per cent in the defensive portfolio. The risk portfolio is divided into four parts: UK equities, the developed world, emerging markets and property. The defensive portfolio is divided into three, roughly equal, parts with a third in index-linked gilts, a third in short-dated gilts and a third in corporate bonds.”

Andy Nevett, of Freedom Financial Planning

“I use a mathematically-driven process to identify the outperforming funds that I should buy and the underperforming ones I should sell. The process involves a number of different criteria, including past performance, relative risk and the rating awarded by a fund research company.

“At the moment the system is telling me to buy Old Mutual North American Equity, Axa Framlington UK Mid-Cap and Wise Investments Evenlode Income.”

Rachel Winter, of Killik & Co

“I’m looking to get on to the housing ladder this year so I’ve taken advantage of the new Help to Buy Isa, which launched in December. You can put in £200 a month plus an extra £1,000 in month one. If I buy a property, the government will give me an extra 25 per cent, or £500. Surely a no-brainer for first-time buyers.

“I’ve used the rest of my allowance to top-up my stocks and shares Isa. I tend to put my highest-yielding investments in my Isa because this allows me to maximise my tax saving. This year I’ve bought Royal Dutch Shell, HSBC and Taylor Wimpey. All of these have dividends of more than 6 per cent, so I’ll be saving a lot of income tax by holding them in my Isa.”

Isas — the rules

● This tax year you can invest up to £15,240 into an Isa.

● The annual allowance is per individual, so a couple can invest £30,480 into Isas each year.

● You can hold the full amount in either stocks and shares, or cash, or you can split your money between the two, provided you do not exceed the overall allowance of £15,240.

● You can transfer money from stocks and shares Isas into a cash Isa, and vice versa.

● Your money builds up free of income tax and capital gains tax and there is no tax to pay when you eventually withdraw your money.

● The money awaiting investment in a stocks and shares Isa can earn interest without having a 20 per cent charge slapped on it, as used to happen before the Isa rules changed in 2014.

● Isa investors can pass on their accounts to spouses or civil partners, and these beneficiaries can continue to run the Isas without any loss of tax benefits.

● A bonus is that you don’t have to declare your Isa investments on your tax return.