Child Trust Fund transfers to Junior ISAs go live next week but where should you invest?

30th March 2015

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Given that from Monday 6 April investors will be able to transfer their Child Trust Fund (CTF) to Junior ISA now might be a good time for parents to review whether they are taking the right investment strategy with their child’s money.

Despite the rule change, children still cannot have a Child Trust Fund and Junior ISA at the same time. However, parents can simultaneously open a Junior ISA and instruct the transfer of a CTF.

Right now, the vast majority, at 80% of CTFs are held in cash and Danny Cox, chartered financial planner at Hargreaves Lansdown asserts that while stockmarkets volatile, over the long term they offer “considerably greater rewards”.

Remember, before you transfer to a Junior ISA, check the value of your child’s CTF and see whether there will be any loss of guarantees or excessive charges upon transfer

Below Cox, highlights five Junior ISA investment fund ideas

Newton Real Return

Those who want to take more risk than cash but without the full volatility of stock markets should consider Newton Real Return which fits the bill here as its primary focus is on capital preservation. The fund is constructed as a core portfolio of equities and bonds which can be supplemented by positions in cash, currencies and commodities. This is a long running fund with an excellent track record of protecting investors while generating decent returns, and deserves consideration by conservative Junior ISA investors.

Lindsell Train Global Equity

Those who are happy with the volatility of the stock market might consider Lindsell Train Global Equity. This is a concentrated portfolio of around 30 companies, hand-picked by the manager for being top quality, global businesses the fund can buy and hold for the long term, perfect for the 18 years a Junior ISA could be invested for. The fund is only 4 years old, but we have assembled portfolio data to analyse the managers’ performance on other global mandates going back to February 2001.  Over this period they have returned 309%, compared to 94% from the MSCI AC World Index.

Marlborough Multi Cap Income

The reinvestment of dividends continues to be one of the most successful long term investment strategies, and income in Junior ISAs is reinvested until age 18. A great example of an income fund is the Marlborough Multi Cap Income. This fund offers investors a different take on the traditional UK Equity Income fund. Most funds in this space invest in the big blue chips of the FTSE 100, while this one prefers to look for opportunities amongst the UK’s medium and smaller cap companies. These companies present a fertile hunting ground for seasoned stock pickers like Giles Hargreave and Siddarth Chand Lall, who run the Marlborough fund. The yield on the fund currently stands at 4.1%.

Legal & General UK Index

Junior ISA investors who simply want to put money in the market without choosing a fund manager should consider the ultra-low-cost Legal and General UK Index. This fund tracks the performance of the FTSE All Share which is a broad representation of big, medium and small companies in the UK stock market. The fund is available from an annual fund charge of just 0.06%.

First State Asia Pacific Leaders

The more adventurous Junior investor could look toward emerging markets for the longer term growth potential, and the First State Asia Pacific Leaders is a firm favourite. Fund manager Angus Tulloch has over thirty years’ experience managing investments in the Asia Pacific region. The cornerstone of his success is his conservative approach in a risky area of the investment world. Over the long term it has proved a highly successful strategy and we believe this fund represents an excellent choice for long term Junior ISA investors.

 

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