On Wednesday, Chancellor Jeremy Hunt confirmed the UK ISA in his Spring Budget, which sets out a new £5,000 allowance, in addition to the existing £20,000 ISA. But it comes with a restriction – the new allowance is exclusively for UK-listed companies.
According to the UK Treasury, the main objective of this increase is to, “support a culture of investment in the UK” and “give people the opportunity to invest and benefit from the UK’s vibrant capital markets and high-growth companies.”
How the government will define UK companies is yet to be confirmed. Until then, the Treasury is opening a consultation that is set to close on 6 June 2024.
My colleague, Ed Monk explored 7 things you need to know about the ‘UK ISA’.
If you’re curious about what UK funds you can consider in your ISA allowance, our Select 50 – a list of expert selected funds offers a variety of actively and passively managed funds, that provide you exposure to UK large-cap and mid-sized companies.
Here’s a closer look at five UK funds from our Select 50 list:
1. Fidelity Special Situations Fund
This actively managed fund was first launched in 1979 and aims to invest at least 70% in UK companies. There’s a focus on companies that the manager believes are undervalued.
Our experts like this fund because the manager is a “seasoned UK investor.” There’s also a willingness to invest in smaller companies, an area in which Fidelity brings expertise.
The fund’s top holdings include DCC, a sales company that operates across energy, healthcare, and technology, consumer staple Imperial Brands, insurance firm Aviva, facility management firm MITIE Group and pharmaceutical company GSK.
This fund may be suitable if you’re looking for a sensibly managed UK equity fund.
The fund’s ongoing charge is 0.91%.
2. FTF Martin Currie UK Equity Income Fund
This actively managed fund aims to generate an income that’s higher than the FTSE All-Share Index.
Its top holdings include oil giant, Shell and BP, consumer goods company Unilever, pharma company, AstraZeneca and GSK, miner Rio Tinto, British American Tobacco, and utilities firm National Grid.
Our experts like this fund as it invests primarily in companies listed in the UK, although the investment manager has the freedom to invest up to 10% outside the FTSE All-Share Index.
The manager is also committed to UK equity investing, which can be a rarity, as most investment firms tend to focus on global investing.
This fund may be suitable if you’re looking for dividend income from companies primarily listed in the UK.
The fund’s ongoing charge is 0.51%.
This passively managed fund tracks the FTSE 100 Index – which includes the 100 largest companies listed in the UK.
Its top holdings include some familiar names, including Shell, AstraZeneca, HSBC, Unilever, BP, and GSK.
Our experts like this fund as it is views BlackRock as a seasoned investor in passive funds, and the fund’s costs are low.
This fund may be suitable if you’re looking for exposure to large UK equities, have a long-term horizon and you’re cost-conscious.
The fund’s ongoing charge is 0.09%
This actively managed fund invests at least 90% in companies that are incorporated, domiciled, or conduct significant business in the UK.
Shell, AstraZeneca, BP, Unilever, GSK, beverage company Diageo, analytics firm RELX and foodservice company Compass Group make up some of the fund’s top holdings.
Our experts like this fund as the managers seek to identify companies that possess intangible assets or other durable competitive advantages.
It’s worth noting that this fund’s approach has a ‘quality’ bias, meaning it will buy companies that tend to be more expensive than others. Due to this, the manager takes a very long-term view when investing.
This fund may be a suitable addition to your portfolio if you’re looking to invest for ten years or more.
The fund’s ongoing charge is 0.82%.
This passively managed fund tracks the performance of the FTSE 250 Index and invests in medium-sized UK companies.
Its top 10 holdings include budget airliner easyJet, property developer British Land, renewable infrastructure company Greencoat UK Wind, property developer Bellway and financial services firm Alliance Trust.
This may be a suitable addition to your portfolio if you want to seek exposure to medium-sized UK companies, have a long-term horizon and are cost-conscious.
Given that the fund invests in medium-sized companies, there may be more volatility and risk arising compared to larger sized companies. If you’re concerned about risk, the iShares Core FTSE 100 ETF may be more suitable.
The fund’s ongoing charge is 0.11%.