3 Growth Funds for a Retirement Portfolio

Looking for funds which match your long-term investment horizon? We highlight three funds invested in growth stocks which could be suitable for a SIPP portfolio

Emma Wall 13 April, 2015 | 2:36PM
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This article is part of Morningstar's Guide to Retirement Saving. All this week we are arming you with the tools you need to secure the best possible retirement income.

When investing for retirement, fund pickers are forced to take a long term view. With a longer investment horizon, you can take on a little more risk – volatility can be used as an opportunity to buy cheap units and it does not matter if you have one bad year when you are invested for a decade.

While the core of an investor’s portfolio should contain low-risk assets, you can afford to up the risk ante in the growth stages of a pension – that is when retirement is still at least five years away. For this stage funds that invest in higher risk assets such as emerging market equities, smaller companies and high-yield can provide an opportunity for double-digit capital growth.

We highlight the funds rated highly by Morningstar analysts that may provide long-term growth in a pension portfolio.

Aberforth UK Smaller Companies

While the very long-term record here is strong, the fund’s value tilt means it’s susceptible to periods of underperformance when growth is driving the market forward, says Morningstar fund analyst Samuel Meakin. We saw this in 2011, when large-cap growth stocks led the way, combined with investors generally shunning risk. In times of such polarised leadership in the markets, it’s no surprise to see this fund struggle to gain ground.

However, with risk appetite picking up and small caps back in favour since 2012, returns are once again strong over both the short and long term, proving the process isn’t broken. The team is another reason for our confidence: It’s stable, well resourced, and has depth of small-cap expertise. Morningstar rates the fund Gold.

Fidelity Emerging Markets

Fidelity Emerging Markets remains a strong option for investors, say Morningstar fund analysts. 

Manager Nick Price has been at the helm of this fund since June 2010. He is supported by a team of six regional portfolio managers. A team of more than 50 emerging-markets research analysts, who are located across the globe, feed ideas into the regional managers and Price, while fixed-interest and global sector specialists across the wider group provide industry views and context. These resources are clearly very impressive and Morningstar analysts rate the fund Bronze

The investment process is predominantly bottom-up. The team focuses on quality growth companies that exhibit the following characteristics: superior and sustainable return on assets; strong, unleveraged balance sheets; shareholder-friendly management; and reasonable valuations over a full economic cycle.

HSBC Euro High Yield Bond

This fund has proved its worth, and we remain fully confident in its merits, says analyst Mara Dobrescu. 

Investors here are indeed in very good hands. Philippe Igigabel has managed the strategy since 2003. He works closely with 11 other managers dedicated to credit at HSBC, as well as about 30 analysts divided by sectors. The experience and the remarkable stability of this team are in our opinion among the strongest in the market. We also appreciate the manager's personal investment in the fund, which aligns his interests with those of investors and rate the fund Silver

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Aberforth UK Small Companies Acc30,655.01 GBP-1.78Rating
Fidelity Instl Emerg Mkts Retail Acc243.10 GBP-0.33Rating
HSBC GIF Euro High Yield Bond AC46.15 EUR0.64Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar