Among funds best positioned to capture this recovery is Baillie Gifford Japan, managed by Hamish Dingwall. Haynes says Baillie Gifford has a large team of experts dedicated to investing in the Japanese market and performance, accordingly, has been strong. This fund invests across small, mid and large caps, so there is a broad and diversified exposure to the market. Paul Ilott, Bates Investment Services HOME: Rensburg UK Select Growth Ilott says one problem facing the UK stock market next year is the relatively poor outlook for some of the dominant industrial sectors in the FTSE 100 index - banks, telecoms and healthcare. Haynes believes this strong performance can be replicated at M&G. AWAY: Baillie Gifford Japan After many false dawns, Haynes believes Japan and Europe are the areas are the key regions poised to outperform during 2006. Felton took over management of the fund early in 2005 after joining M&G from F&C, and since then it has been a very strong performer." In his previous job Felton managed the Isis UK Prime fund (now F&C UK Prime) and that had exceptional performance.

"Additionally, Felton has proven himself as a capable stock picker and he works alongside a strong team at M&G. He says the manager of M&G UK Select, Mike Felton, tends to have a large cap bias within this fund, as well as a bias toward growth companies, which is another area that Haynes expects will come back into favour. "That could attract more investors to Japan, which could further fuel growth in the market." Gavin Haynes Whitechurch Securities HOME: M&G UK Select Haynes believes that after several years of outperfomance from smaller cap shares within the UK equity market, large blue chip shares will take the lead during 2006. "Currently, Japanese companies only distribute about a fifth of the income they earn, but that is set to increase as management becomes more shareholder friendly," Greenwood says. In particular, he likes the way the Morrant Wright Japan Income managers are aiming to take advantage of dividend growth in Japan. He says that although there have been many false dawns in the past, domestic recovery within Japan means this current recovery seems more entrenched. AWAY: Morrant Wright Japan Income Greenwood says that although the Japanese market has performed well in 2005, he expects this to continue throughout 2006 and the best qualified managers of investment trusts who can capture this trend are Ian Wright and Steve Morrant of the boutique fund management house Morrant Wright.

Greenwood warns: "This fund seeks high returns, but performance could be very volatile." Shares of Artemis Alpha are trading on a premium of around 5 per cent to their net asset value. The fund also holds a stake in the private equity of Artemis itself. Geographically, around 70 per cent of the portfolio is invested in the UK, with select investments in other regions. In addition to shares, the fund can invest in other types of instruments such as hedge funds, derivatives, bonds and unquoted investments.

If very negative on other types of assets, the manager would move the assets into cash to preserve investors' capital. "At the moment, the fund has a strong bias toward oil exploration companies, a sector which we expect will continue to perform well given the high oil price and the fact larger companies like BP and Shell have under invested in this area," Greenwood says. Meanwhile, the US economy is in reasonable shape and companies are profitable. He says the manager best positioned to capitalise on the strong US market is Legg Mason's Bill Miller. Although the Legg Mason US Equity fund has only been available to US investors since January 2003, Miller is well known for being the only manager to outperform the S&P 500 index for 14 consecutive years, a feat he achieved in his US-based fund. He is also on course to beat the market for a 15th consecutive year.

"Miller is classed as a 'value' manager, but not in the traditional sense as he judges value on the price he pays for a company relative to future potential (discounted) cash flows," Modray says. Nick Greenwood, Iimia HOME: Artemis Alpha This investment trust is managed by John Dodd, a smaller companies specialist at Artemis. However, because growth companies have been out of favour for this reason, they are now cheaper than their value counterparts. Therefore, Modray expects strong performance from growth stocks as they catch up to the rest of the market.