However, this may turn out to be a blessing in disguise if excitement around artificial intelligence starts to wane. Industries such as energy, utilities, consumer staples and healthcare tend to be more defensive than technology.

So far this year, we have already seen a slight rotation from growth to value as rising interest rates have reduced the appeal of unproven earnings in the future and made the UK’s cash generative stocks look more compelling. Conflict in the Middle East – and the resulting rise in the oil price – has also stoked interest in energy giants.

That’s not to say the UK is untouched by the AI boom. Almost 30 years after its IPO, Computacenter burst onto the FTSE 100 in June and has been the index’s best performer over the past year.

Computacenter helps companies buy, install and run their IT systems, sorting everything from cables to workplace laptops. AI has changed the game, with orders in North America more than doubling due to data centre building projects.

UK fund ideas

Deciding where best to invest in the UK can be a challenge, given the vast array of funds, investment trusts and ETFs currently available.

Fidelity’s Select 50 contains a manageable list of five hand-picked UK funds, each designed to produce growth, an income, or a combination of the two. It encompasses both actively managed and tracker portfolios.

Here, we have pulled together a summary of the Select 50 views. Please note that dividend yields are not guaranteed.

FTF Clearbridge UK Equity Income Fund

This is one of three actively managed UK funds on the Select 50 list. It is run by Franklin Templeton and aims to deliver market-beating income. Unsurprisingly, dividends are the big focus. The portfolio has between 40 and 60 holdings, and prioritises large, dividend paying companies. It doesn’t invest in bonds or derivatives to boost its income.
Top holdings include HSBC, Shell and British American Tobacco. It has an ongoing charge of 0.52% and a historic yield of 3.6%.

Fidelity Special Situations Fund

This fund, run by Alex Wright and Jonathan Winton, takes a contrarian approach, and focusing on unloved underappreciated UK companies. The portfolio is skewed towards medium- and smaller-sized businesses, but big names like Lloyds and Standard Chartered feature among its top holdings too. It currently leans towards industrial stocks, and the consumer discretionary sector. It has a historic yield of 2.2% and an ongoing charge of 0.91%.

Liontrust UK Growth Fund

As its name suggests, this fund invests primarily in companies listed in the UK, although it may invest smaller amounts further afield. The fund has a ‘quality’ bias, leading it to companies that tend to be more expensive than others but with the potential for good growth. This approach has struggled in recent years, but could suit a long-term investor and blends well with a ‘value’ fund such as Fidelity Special Situations.

The historic yield has been a little lower than the other funds at 2.1% and the fund has an ongoing charge of 0.83%.

iShares Core FTSE 100 UCITS ETF

This is a passive fund, also known as an index tracker. It holds the individual constituents of the FTSE 100 in the correct amounts to track the index. BlackRock, which runs the fund, is a seasoned investor in passive funds and this fund’s charges are extremely low. As such, it may suit cost-conscious investors with a longer time horizon. The yield is 3.1% and the ongoing charge is just 0.07%.

Vanguard FTSE 250 ETF

This is another index-tracking fund, but it invests in mid-sized companies listed in the UK. Vanguard is an expert in index tracking and this fund is well priced, with an ongoing charge of 0.1%.

It is focused on mid-sized companies and represents a sensible choice on the riskier side of a portfolio. Mid-sized companies can be more volatile and riskier than their larger counterparts. The historic yield sits at 3.4%.

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