The choice of the experts

Investment firms desperate to attract new Isa business are bombarding potential investors with advertising on TV, in the press and even through the letter box.

Each firm uses the statistical information which makes its own funds look best, making it hard for potential investors to compare funds on a like-for-like basis. To make the selection process easier for you, Cash asked four leading independent financial advisers for their recommendations for funds designed to generate capital growth.

David Aaron, of the Milton Keynes firm David Aaron Partnership, has chosen Gartmore European Selected Opportunities. Aaron says this fund has a five-star rating from Micropal and a AAA rating from Fund Research.

The fund, launched in 1984, is worth approximately £1.5 billion and is managed by Roger Guy, an economics graduate specialising in European financial analysis. He has 11 years of experience managing European funds, and now heads the Gartmore European Desk.

Aaron feels the economic outlook for Europe is brighter than for a decade, with growth expected to around 3 per cent. The euro is expected to increase in value against sterling and, in the meantime, its weakness will continue to boost exports, driving economic recovery further.

'We anticipate European interest rates to continue to remain low, providing further support for equities,' says Aaron. 'The fund's favourite shares are Nokia, Eriksson and Phillips, and the manager's philosophy allows for a minimum of 50 per cent in larger blue chip European companies, with a balance in smaller companies and shorter term selected opportunities, including technology.'

European Selected Opportunities has grown by 124.4 per cent over the last three years, 272.2 per cent over five and 442.1 per cent over 10 years. 'It very much remains among the top performers in Europe,' says Aaron.

Mark Dampier, the head of research at Hargreaves Lansdown, picks the Sarasin EquIsar Isa, a global fund that invests in five key themes, which can change. The present themes are e-commerce, technology, industrial deflation, world energy and corporate restructuring.

Fund manager Michael Jennings picks blue-chip companies that represent the themes. According to Dampier, the geographic split of the fund is 30 per cent in the UK, 20 per cent in the US and the balance split between Europe, Japan and the Far East.

The fund, which was launched over five years ago, has achieved an average return of 16 per cent a year.

'For people who want diversification, it is a good fund,' says Dampier. 'Its global spread means that investors are not betting all their money on one horse.'

Andy Cowan, a director at the Edinburgh office of Aitchison & Colegrave, picks two funds from Newton to achieve capital growth: the Continental European and the Higher Income .

Cowan says the Newton Continental European fund has an excellent record from investing in companies in mainland Europe.

He uses the Higher Income fund to achieve capital growth by reinvesting the income. 'By reinvesting the dividends in this way, it is possible to support the underlying value of the fund,' he says.

Cowan points out that the growth on both funds has been admirable. 'The Continental European fund has achieved a return of 26.5 per cent a year over five years and 14.1 per cent a year over 10 years,' he says. 'During 1999, it achieved a return of 44.2 per cent.'

The Higher Income fund has produced returns of 17.8 per cent a year over five years and 12.5 per cent a year over 10 years. It achieved a return of 18.2 per cent in 1999. Cowan believes these funds suit investors who can tolerate medium risk and want growth over a medium term.

Aberdeen Technology is the choice of Robert Reid, a director of North London firm Syndaxi.

The fund aims to provide above-average, long term capital growth from an international portfolio of shares in companies involved in high tech industries. Over the last year it has grown by 182.4 per cent, by 443.2 per cent over three years and 877.2 per cent over five years.

The fund, which was launched in February 1982 and is managed by John Pullar-Strecker, invests primarily in the US but Japanese and UK stocks also form an important part of the portfolio.

Reid likes Aberdeen Technology because it does not just invest in dot.com companies, but in the companies that support them. 'In a gold rush, it is sometimes best to invest in the companies that make the shovels,' he says.

• Further information: Gartmore 0800 289336; Sarasin 020 7246 0440; Newton 0171 332 9000