Funds play a really important role in most investors’ portfolios. Many of us may not have the time or the inclination to research our own investment ideas and would rather entrust a professional to pick stocks (and other investments for us).

The strength of broad market indices, particularly global and US ones, has made it difficult for actively managed funds to outperform over the last decade and this has seen investors turn to trackers and ETFs which are typically lower cost. However, the market outlook is becoming less predictable and this could set the scene for active management to come into its own and justify the accompanying higher charges.

On this basis, the Shares team has identified six of their best fund ideas for 2025. This is not intended as a balanced portfolio, instead these selections are dictated by the personal preferences of our team based on their decades of market experience. Read on to discover the names Steven Frazer, Martin Gamble, Ian Conway and James Crux think can outperform both this year and into the future.

 

Blue Whale Growth (BD6PG78)

Price: 259.14p 

Steven Frazer–News Editor

I prefer my active fund managers to be active, and Blue Whale Growth (BD6PG78) is certainly that. Manager Stephen Yiu and his team are willing to make bold calls backed by deep in-house research with superior returns first and foremost of his objectives. 

With a solid covering of global indices (S&P 500, Nasdaq, for example) in my portfolio, it makes me very comfortable backing a fund that is betting it can find better returns away from most of the ‘Magnificent Seven’, with AI chips firm Nvidia (NVDA:NASDAQ) its only pick from that group.

Blue Whale Growth is not a tech fund – it has previously deployed capital into oil sands in Canada and railroads in the US – merely one that sees many of the better investment opportunities in and around the tech sphere, a theme that has been in play since the internet emerged more than two decades ago. Since then, we’ve seen rampant growth in ecommerce, automation, cloud computing and, now AI and possibly quantum computing down the line, sets the scene for that to continue.

So far, infrastructure technology specialists have stolen the AI show, providing crucial chip technology to lay the foundations for what many experts see as a brave new AI world ahead of us. Blue Whale was ahead of the curve when it first invested in Nvidia nearly four years ago, and the fund continues to see the best opportunities in infrastructure, hence names like Broadcom (AVGO:NASDAQ), TSMC (TSM:NYSE), Lam Research (LRCX:NASDAQ) and Applied Materials (AMAT:NASDAQ) featuring prominently in the portfolio.

This year could a big one for AI-powered software applications, according to many experts, another call that sets Blue Whale apart from peers. The fund agrees that AI will transform software applications but at this stage, believes it too early to call winners and losers, so it chooses to wait and watch from the relative sidelines and deploy capital where it has much higher conviction.

Perhaps Blue Whale’s take will be proved overly cautious, who’s to say, yet with that foundation of S&P 500, Nasdaq in my portfolio, it makes Blue Whale’s bold calls a more comfortable fit.

Last year the fund celebrated its seventh year since launch, and the track record is good, having outstripped its Investment Association Global benchmark every single year bar 2022, often by wide margins – it’s done better than twice as well as its benchmark in each of the past two years. Since launch, cumulative returns are 164.1% versus 83.7%.

Past conversations with Yiu also reveal that, barring some property investments, his private portfolio is exclusively in the Blue Whale fund, so you can hardly ask for more in terms of aligning his interests with those who invest in the fund. Annual charges are 1.09%, available for both accumulation or income-bearing units, which I don’t see as unreasonable for the performance delivered to date and the potential for more superior returns down the line. 

DISCLAIMER: Steven Frazer has a personal investment in Blue Whale Growth.

 

Edinburgh Worldwide (EWI)

Price: 195.8p 

Ian Conway–Deputy Editor

I wouldn’t say I’m a cautious investor, but I like to balance my portfolio so when markets have a wobble I’m neither ‘all-in’ nor ‘all-out’.

I achieve this by having around two-fifths of my investments in income-generating UK stocks and investment trusts, reinvesting the dividends every quarter (or every month) so my money compounds.

Another two-fifths is invested in what I believe are truly great UK growth companies bought at a good price – obviously the dream is to buy great companies at a great price, but you don’t often get the chance.

The remaining fifth is in cash and more whizzy ‘blue-sky’ stocks which I think could double or treble (although some have halved, which is why they are only a small part of my portfolio).

This is where Edinburgh Worldwide (EWI) comes in. The trust, which is managed by Baillie Gifford, aims for capital growth from ‘a global portfolio of initially immature entrepreneurial companies’ which are typically fairly small at the point of initial investment and offer long-term growth potential.

The two biggest holdings are private companies – Space Exploration Technologies, also known as SpaceX, and PsiQuantum, which aims to build the world’s first useful quantum computer (note the word ‘useful’).

However, the majority of the holdings are quoted US companies across the software, biotech and aerospace and defence sectors, with a smattering of UK names like Oxford Nanopore (ONT).

So, how is it working out? Given it’s a fairly recent purchase, I’m not in the same boat as longer-term shareholders who are sitting on losses of 40% over the three years to November, but I could have timed it better as the shares are up over 30% in the last year, so I certainly didn’t buy at the bottom. Currently the trust trades at a modest premium to net asset value.

Why did I buy it? It sits in the ‘blue-sky’ part of my portfolio, where I owned Seraphim Space Investment Trust (SSIT) from its IPO in 2021, sold for a small profit and then forgot about until it more than doubled in the first half of last year.

Since then, space has become seriously big business, with the valuation of SpaceX rocketing this year (pardon the pun), while quantum computing is ‘the next big thing’, plus the trust gives me exposure to game-changing businesses in parts of the market I wouldn’t normally venture into and all for a very reasonable (in my view) 0.7% ongoing charge.

Finally, the trust has committed to share buybacks and a capital return programme of up to £130 million this year which will be earnings accretive. The recent push for change at the trust by activist US hedge fund Saba (along with several other peers) is a source of uncertainty to weigh but could ultimate result in a positive outcome for shareholders.

DISCLAIMER: Ian Conway has a personal investment in Edinburgh Worldwide.

 

HgCapital Trust (HGT)

Price: 534.5p  

Steven Frazer–News Editor

One thing fund managers keep telling me is that tech businesses are staying private for longer. There’s plenty of capital sloshing about private markets and less red tape, so founders keep kicking the IPO (initial public offering) can further down the road, denying many ordinary investors access to some exceptional businesses.

Elon Musk’s SpaceX, for example, has become a crucial leader in the wider space economy, developing the first ever reusable rockets without needing a public market listing. Institutions have piled ever more enthusiastically into private markets over the last two decades, and pension funds increasingly feel they have no choice. 

There’s a handful of very good private equity specialists and other funds that ordinary investors can buy that will give them access to many exciting privately-owned enterprises, but HgCapital Trust (HGT) really stands out to me for a few reasons. One, its deep layers of experience and expertise; two, a broad portfolio of around 50 largely subscription‑based tech business models generating predictable revenues and cash flows drawn from across the technology sphere; and three, a long track record of superior returns.

Trustnet data puts the fund’s cumulative five-year performance at 126.3%, versus a 52.6% return across the investment trust private equity segment, an impressive outperformance. Yet outstanding longer run performance demonstrates that HgCapital’s strategy is sustainable, with average annualised returns of more than 16% going back 15 years, according to Morningstar.

Many of the prominent names in the portfolio might be unfamiliar to those outside the industries they serve, but that doesn’t mean they aren’t among the leaders in their fields. Visma, for example, has developed a range of software automation tools sold across Europe and Latin America, generating €2 billion-plus revenues, and rumour has it that it has started to think about an IPO possibly in 2026, an event which would only increase its global profile, so it’s something to watch.

Names you might know include FE Fundinfo, an investing data company that some of you may use… we do at Shares. There’s also Ideagen, previously listed on AIM before its 2022 take-private, a specialist governance, regulations and compliance software firm that is fast carving out a leadership spot among                                           its peers.

There are drawbacks, not least the costs. The ongoing charges figure of 1.99% a year may look steep at first glance, although I believe this is reasonable given the private equity market exposure it gives you and its ability to repeat outlier returns performance for years into the future.

The NAV (net asset value) discount has also narrowed in recent years as increasing numbers of investors chase a relatively small number of private equity investment options. That said, at -1.2%, even if the discount did widen towards its five-year -6.6% average, it would likely have only a modest impact on overall performance.

 

Ranmore Global Equity (B61ZVB3)

Price: £440.80  

James Crux–Funds and Investment Trusts Editor

One fund I reckon can continue to deliver in the New Year, particularly if the US market has a wobble, is Ranmore Global Equity (B61ZVB3), a differentiated, value-oriented portfolio managed by Ranmore Fund Management’s Sean Peche alongside Andrew Lapping. This pair prefers exposure to companies that have upside potential with limited downside risk and the bulk of the fund’s portfolio is invested outside of the expensive and concentrated US market.

Adorned with five FE fundinfo Crowns and a five-star Morningstar rating, Ranmore Global Equity is ranked first quartile over five years and to my mind, looks a savvy satellite pick to complement core fund holdings given its high active share of 99%.

Peche and Lapping are a tight-knit, nimble team who invest around the world guided by value, as opposed to following the crowd or hugging the benchmark. They put in the hard yards to unearth often small and mid-cap companies offering value; given its meaningful mid cap exposure, the fund could benefit from Donald Trump’s election should takeover activity increase as regulators are forced to step back.

Focused on long-term cash flow streams and the calculation of ‘normal’, unadjusted earnings and fair value, Peche and Lapping eschew meetings with slick company management teams and avoid highly rated businesses and over-indebted firms.

Admittedly, ongoing charges of 1.3% are on the onerous side, but Ranmore Global Equity has no performance fee and I also like the fact Peche and Lapping invest their own money in the fund.

As of 30 November, Ranmore Global Equity’s exposure to North America was 23%, significantly below the benchmark MSCI World Index’s 76%. As Peche explained in the latest factsheet: ‘Being significantly underweight the USA relative to the major benchmarks raises some eyebrows, but we worry more about the risk of capital loss than being differently positioned to benchmarks. Most US equities are expensive relative to historical valuations and international peers and over the long-term that means lower returns and higher risk of capital loss.’

Ranmore Global Equity had a materially higher exposure to Europe than the benchmark, 33% versus 16% respectively, and meaningful allocations to Hong Kong/China and South America. Top 10 holdings at last count ranged from Brazilian oil and gas company Petrobras (PBR:BCBA), Dutch bank ABN Amro (ABN:AMS) and French retailer Carrefour (CA:EPA) to budget airline Ryanair (RYAAY:NASDAQ) and Chinese search engine Baidu (9888:HKG).

Another position is Mattel (MAT:NASDAQ), the cash-generative toy company which has been turned round by what Peche describes as an ‘astute management team’ and is buying back stock. Mattel, whose well recognised brands include Barbie, Hotwheels and Fisher Price, is also building upon the success of the Barbie movie by working to monetise other content. 

 

International Biotechnology Trust (IBT)

Price: 678p  

Martin Gamble–Education Editor

Biotechnology-focused trust International Biotechnology (IBT) ticks a lot of boxes for me, including the fact the managers have worked together for over a decade and deploy a differentiated and proven investment process.

The biotech sector has historically outperformed the S&P 500 index, driven by positive structural demographic trends, but over the last five years it has lagged by around 70% presenting an attractive long-term entry point in my view.

Meanwhile, the trust trades on an attractive 12% discount to net asset value, which is likely to narrow over time as the sector recovers and fund managers Ailsa Craig and Marek Poszepczynski continue to deliver market-beating returns.

Another big attraction is that the trust pays a dividend equivalent to 4% of NAV distributed twice a year.

The £300 million trust became part Schroder’s healthcare platform in August 2023 after the manager beat 19 other investment groups to win the mandate from SV Health Investors, which had decided to focus on its core private equity healthcare businesses.

Managers Craig and Poszepczynski have worked on IBT since 2006 and 2013 respectively before becoming joint mangers in March 2021, and the trust outperformed the Nasdaq Biotechnology index over one, three, five and 10 years to 30 August 2024. This justifies the relatively high ongoing charges of 1.4%.

Pleasingly, performance has been accompanied with lower volatility than the index and across both rising and falling markets, demonstrating the trust’s ‘all-weather’ appeal.

Its performance also reflects the team’s flexible, value-driven approach and ability to adapt to evolving market conditions with a focus on capital preservation and selective risk-taking.

A large part of the manager’s success in recent years is down to positioning the portfolio towards acquisition targets ahead of an anticipated pick up in M&A (merger and acquisition) activity as large pharma firms face patent expiries during the second half of the decade – since 2020, the portfolio has benefited from no fewer than 25 takeovers.

Craig and Poszepczynski believe the lion’s share of the bigger deals have been done, which means the next phase is likely to involve smaller and earlier clinical-stage firms.

The managers have positioned the portfolio accordingly and created baskets of smaller- and medium-sized stocks to capture the anticipated upside and spread overall risk, including a basket for the next generation of obesity treatments which are currently in clinical trials.

The team have increased exposure to therapies for the central nervous system, which has the largest weighting in the portfolio, and lowered their exposure to oncology (cancer) therapies.

They have also made tactical use of the trust’s borrowing facility with gearing of 8% as at the end of November 2024.

 

TwentyFour Select Monthly Income (SMIF) 

Price: 87p  

Martin Gamble–Education Editor

There is a lot to like about the TwentyFour Select Monthly Income Fund (SMIF), not least of which is the opportunity for income seekers to better meet their monthly outgoings.

For investors focused on capital growth, the opportunity to compound monthly instead of biannually or quarterly is equally valuable. The managers invest in a diversified portfolio of fixed income credit securities which are less liquid and therefore offer a yield premium over equivalent high-yield corporate bonds.

The managers believe this part of the fixed income market has been overlooked in the recent liquidity-driven rally, which has pushed high-yield corporate spreads to one of the narrowest levels on record.

This means it can invest in higher-yielding securities without talking on as much credit risk, so around 60% of the fund is currently invested in investment-grade or double-B rated (just below investment-grade) credit.

Around 80% of the portfolio is in CLOs (collaterised loan obligations), subordinated debt such as AT1s (additional tier one securities) and restricted tier-one bonds, European high-yield corporate credit and floating-rate ABS (asset-backed securities), which benefit from higher-for-longer interest rates.

Subordinated debt is an unsecured loan which ranks below senior debt, while AT1s are bonds which form part of a bank’s regulatory capital which can be converted into equity if its tier one capital ratio falls below a certain threshold.

The managers invest across a wide spectrum of fixed income credit allocating to areas of the market they believe represent attractive relative value. This is reflected in an 8.9% dividend yield.

At the recent full year results (12 December 2024), portfolio manager George Curtis commented: ‘We continue to focus on our rigorous bottom-up process to find areas of the market where we see attractive relative value. Both the CLO and subordinated financials sectors have benefitted from supportive fundamental and macro tailwinds, whilst offering a pick-up in spread and yield on a risk-adjusted basis.’

The company has a target net total return of between 8% and 10% per year comprising a dividend of 6p per share and a capital return of 2p to 4p, both based on the original issue amount of 100p.

However, in the year to 30 September the company delivered an above-target dividend of 7.38p per share and an impressive NAV (net asset value) total return of 22.5%.

At a time when most investment trusts are trading at a discount to NAV and struggling to raise capital, the company’s strong performance and premium allowed it to issue 18.3 million shares to meet investor demand. 

Over the last decade the fund has delivered compound annual growth in NAV per share including dividends of 6.4% per year. Ongoing charges are 1.24%.

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