Growth - low risk

HSBC UK Growth & Income
With UK equities at reasonable valuations, I am happy to recommend this fund as a lower risk choice, for investors prepared to invest for the long term. This fund has been managed since launch in 1998 by the highly respected Tim Russell, who has produced consistently strong performance during this time.

The fund has an excellent risk/reward ratio and has consistently outperformed both its benchmark sector and the FTSE All-Share index. Russell has proved his defensive qualities over the past year, when the fund fell considerably less than the FTSE All-Share.

This fund is managed on a total return basis, with little regard paid to income generated, although at present you could expect to receive a yield of around 3 per cent to complement capital growth.

Tim Russell (ex-Lazards) maintains a low level of volatility and aims to produce a 1.5 per cent premium to the All-Share index on a rolling compound annual basis. He uses a flexible style driven by business cycle analysis, whereby he will alter the structure of the fund dependent upon the stage in the economic cycle.

The fund is currently placed with a view to economic recovery, it has a mid-cap bias with an overweight position in cyclical stocks and an underweight position in defensive areas of the stock market. I believe it is an excellent low-risk core holding.

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Income - medium risk

New Star European Growth
The fundamentals that will drive European equity markets in the coming years are still extremely positive with tax and pension reform, labour market changes and companies focusing on restructuring and shareholder value.

As a result we anticipate good returns for investors in Europe when the shoots of global economic recovery begin to show. I believe New Star European Growth offers excellent exposure to continental Europe.

New Star Asset management is an exciting new addition to the industry and provides investors with exposure to star fund managers who have an ownership stake in the management company for whom they work.

Therefore they have a vested personal interest for their funds to perform strongly. This fund was launched in July 2001, under the management of Richard Pease who established an outstanding track record of managing European equities whilst at Jupiter.

Effectively when purchasing this fund you are relying solely on the stock selection abilities of Pease, as he will have no strict sector or country parameters. However the nature of his stock selection means that absolute risk is tightly controlled.

Pease will buy high quality companies and valuation is very important. Whilst not classed as employing a value based approach, Pease stresses the importance of low valuation in reducing specific risk - especially at a time when there are so many earnings disappointments occurring.

The pragmatic approach employed on this fund should prove ideal in the current climate where we believe pure stock-pickers will outperform. The fact that the fund will have a small-to-medium company bias should also prove positive and I believe this fund will prove to be a good core European holding.

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Income - high risk

M&G Innovator
This recommendation may come as a bit of a surprise, when you consider that this fund has been one of the worst-performing unit trusts in 2001. Although it remains very high risk, I believe it could prove to be a strong turnaround story when investor sentiment improves.

M&G Innovator is an aggressive growth fund focusing primarily on UK smaller companies. It invests in a concentrated portfolio of around 35 stocks, with stock selection emphasis and a thematic approach.

The fund follows two broad themes:

1. Technology-driven growth, investing in companies that have, or are benefiting from new technologies.

2. Sectoral growth, investing in underlying markets/sectors that are growing faster than the economy, aiming to identify the best companies in these markets with distinctive business models that are capable of delivering sales growth over time.

Its goal is to "pick tomorrow's winners today", which often means investing in small companies with no track record. These companies have been completely out of favour with investors during the economic slowdown and prices have fallen drastically.

However, I believe the fund is ideally positioned to take advantage when investor sentiment improves. Valuations among many growth stocks currently reflect modest expectations of future growth and the upside potential from these levels is significant.

M&G has put one of its leading fund managers, Neil Pegrum, in charge of this fund. Pegrum is head of UK Smaller Companies at M&G and has a strong track record managing its British Opportunities fund.

I believe his appointment to manage this fund in the autumn 2001 could prove timely and see this fund make the headlines for the right reasons in 2002.

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The opinions of the panel are their own and are not necessarily endorsed by FTyourmoney. The material here is for general information only and is not intended to be relied upon for individual investment decisions. Consult an independent financial adviser before making any such decisions.