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Unit Trust and OEICs / Sector analysis

Cautious Managed

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The differences between this sector and the Balanced Managed sector are apparent in the Cautious Managed sector assuming a few more restrictions in order to deem its constituents as being ‘safer’ investments. A predominant industry classification restricts these funds to include a maximum equity exposure of up to 60%, coupled with at least 30% invested in fixed interest and cash. Cautious managed portfolios are effectively tailored to include an allocation between stocks and bonds that are designed to provide both income and capital appreciation while avoiding excessive risk. They should be held over the longer term, with a five year view, and are aimed at risk averse investors seeking capital preservation, with an exposure to bonds and equities in order to generate returns above simply holding cash.

Financial Express Analytics shows that more than 150 funds exist within this sector. Of these funds, approximately half display a history of 3 years or longer, highlighting the relatively recent launches in this sector.

Given the market turmoil experienced since 2008 many have looked towards this sector as a safe haven for their cash, with its prominence centring on its objectives of low risk capital preservation; it has therefore increased in popularity, sparking more launches of funds within this space.

By addressing trends in the overall sector holdings, it is evident that fixed income has begun to feature more prominently, reflected by overweight positions in fixed income securities compared to UK equities - given that this balance historically has been tended more towards equities.

The risks taken by the constituent funds have nevertheless been as we expect, with every fund displaying a lower volatility than that of the FTSE 100 index.

Overall, while market sentiment remains cautious, this sector should remain a popular theme for investors seeking capital preservation. Until recovery from recession becomes more solidly established, the bias could remain skewed towards funds that are truly cautious and deliver their intentions of taking low risks and offering a better return than simply holding cash.

*Source of data: Financial Express Analytics
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Cautious Managed



IMA definition of sector
Funds which offer investment in a range of assets, with the maximum equity exposure restricted to 60% of the Fund. There would be no specific requirement to hold a minimum % non-UK equity. Assets must be at least 50% in Sterling/Euro and equities are deemed to include convertibles.

 

Top ranked constituents by 3y performance (%)
Gartmore Fund Managers funds in this sector
Fund Fund size Launched Quartile Crown rating
Gartmore MultiManager Cautious £72.04m 30-Sep-2004 n/a FE Crown Rating
Gartmore Cautious Managed £886.44m 01-Feb-2003 2 FE Crown Rating
Key to codes

SH : Insufficient history
SS : Sector too small to be eligible
US : Sector is not rated
OH : Suspended

Cumulative performance
  1m 3m 6m 1y 3y 5y
Cautious Managed 0.7 1.8 1.9 8.5 1.2 13.8
performance