Balanced investors are those whose attitude to risk isn’t quite low enough to be considered cautious but who want more protection than the aggressive, risk-oriented funds offer.
We asked the members of our AFI panel for the funds they like for balanced investors this ISA season.
Schroder MM Diversity Tactical
Chris Wise, investment director at Gemmell Financial Services and AFI panellist, says that the newly renamed Schroder MM Diversity Tactical fund fits the bill.
Following the acquisition of Cazenove by Schroders, FE Alpha Manager Marcus Brookes’ and Robin McDonald’s funds have been renamed under the latter’s moniker – this fund was formerly Cazenove MultiManager Diversity Tactical.
“The fund provides an investor with a significant coverage of equities, with the flexibility of using other asset classes to achieve the mandate of capital appreciation,” Wise said.
“The team has achieved significant success in the Multi Manager area and the fund would be suitable for a balanced investor.”
Data from FE Analytics shows that the fund, which has a fund of funds structure and five FE crowns, is top quartile over three years in the IMA Flexible Investment sector, having returned 34.23 per cent. Its bespoke benchmark has made 24.8 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Top holdings are currently Majedie UK Focus, GLG Japan Core Alpha and Invesco Continental European Equity.
It has 29.17 per cent in cash, reflecting the manager’s bearish view on markets, and 20.55 per cent in UK equities.
It is available through Trustnet Direct and has ongoing charges on a clean share class basis of 1.42 per cent.
Standard Life Global Absolute Return Strategies
Wise also likes Standard Life GARS for balanced investors. The absolute return sector is normally the preserve of the cautious investor, but Wise thinks its record of producing decent returns makes it suitable for someone with a greater concern with positive returns.
“The fund has the remit of achieving near equity like returns with 2/3rds the risk, which means the fund is suitable for a balanced investor,” he said.
“The multi asset investment process, has achieved its mandate over the long term and the given the team size, it removes any single manager risk, inherent in some fund selections.”
The fund has made 8.52 per cent a year over the past five years with volatility of just 4.88 per cent.
Over that time it has made 50.59 per cent in total, well ahead of its six month LIBOR plus 5 per cent benchmark.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
GARS is in essence a multi-asset hedge fund with dozens of different positions designed to make money in different circumstances.
Standard Life have announced they intend to launch a more aggressive version of the portfolio targeting 6 month LIBOR plus 7.5 per cent this year.
GARS is available with clean share class ongoing charges of 0.84 per cent.
AXA Framlington Managed Balanced
Paul Warner, AFI panellist and managing director of Minerva Fund Managers, says that investors should look at AXA Framlington Managed Balanced, run by Richard Peirson since 1994.
The fund is top quartile in the IMA Mixed Investment 40%-85% Shares sector over three, five and 10 year periods.
Over the past decade it has made 142.78 per cent as the average fund in the sector has made 88.52 per cent.
Performance of fund vs sector over 10yrs
Source: FE Analytics
“The consistency of his performance is exceptional and worthy of consideration by any 'Balanced' investor,” Warner said.
Peirson’s £622m portfolio has slightly increased its cash weighting in recent months, according to our data, but has its largest position in UK equities, at 39.94 per cent of the portfolio. Cash makes up 14.33 per cent and US equities 13.86 per cent. The fund has just 9.58 per cent in fixed interest.
The manager explained to FE Trustnet in a recent interview that Gilts were starting to look attractive again.
The fund’s largest single holding is in the AXA Framlington Emerging Markets fund, worth 2.9 per cent of the portfolio, while long-dated gilts and large cap UK stocks also feature highly. Ongoing charges are 0.7 per cent.
Consistent Practical
Warner also suggests that investors take a look at the relatively unknown Consistent Practical fund, a £52m portfolio that has been run by FE Alpha Manager Sean Ashfield since 2009. It has five FE crowns.
The portfolio is a fund of investment trusts, largely focused on growth and income funds with a UK bias.
The fund has the highest sharpe ratio in the IMA Mixed Investment 40%-85% Shares sector, meaning it has the best risk-adjusted returns.
It also has the highest absolute returns over that time of 48.84 per cent compared to the 20.03 per cent of the sector average.
Performance of fund vs sector over 3yrs
Source: FE Analytics
However, this has been a period in which the discounts on investment trusts have narrowed considerably across the board, meaning that trusts and those that invest in them have had an extra boost.
This cannot happen again in the coming three years, so returns may not be as impressive for this reason.
The largest single position is in London & St Lawrence, another fund of funds which the same manager runs. Alastair Mundy’s Temple Bar and Aberforth Geared Income are the next biggest holdings.
The fund has a yield of 3.27 per cent and ongoing charges of 1.1 per cent on a clean share class basis.
FE Trustnet will be carrying an exclusive interview with the manager in the coming days.
