However, a number of DFMs are increasingly making versions of their model and actively-managed portfolios available to the average investor; with a select few sitting in the IMA’s various multi-asset sectors.
Statistics show that most investors who want funds of funds within their portfolios will usually turn to the same old names. However, data from FE Analytics shows that several DFM groups have OEICs which have managed to keep pace, or in some cases actually outperform, the likes of the multi-billion pound Jupiter Merlin and Schroder Multi Manager ranges.
In this article, we highlight three multi-asset funds – all of which are managed by DFMs – that have consistently outperformed both their respective IMA sectors and composite benchmarks in recent years.
PFS Hawksmoor Distribution
Exeter-based Hawksmoor Investment Management primarily focuses on discretionary management for private clients, but has two OEICs in the IMA universe which are available on the majority of fund platforms. The £23m PFS Hawksmoor Distribution fund, which is co-managed by Daniel Lockyer and Richard Scott (pictured), has been one of the leading lights in the IMA Mixed Investment 45%-80% sector since its launch in April 2012.
According to FE Analytics, it has returned 33.66 per cent since inception, putting it in the top decile of the sector. It has also outperformed its benchmark – the FTSE WMA Stock Market Income index – which has returned 19.25 per cent over that time.
Performance of fund vs sector and index since Apr 2012
Source: FE Analytics
As its name suggests, the fund’s primary objective is to deliver income to its investors. The fund currently yields 3.38 per cent; our data shows that investors who bought £10,000 worth of units when in launched would have earned £831.17 in income by now.
Scott and Lockyer invest in both open and closed-ended funds, with the latter making up around a quarter of the portfolio. One of their largest individual trust holdings is the F&C Private Equity Trust.
Other top-10 holdings include RWC Enhanced Income, Jupiter Strategic Bond, Schroder Asian Income Maximiser, Artemis Global Income and CF Miton UK Multi Cap Income; which is closed to new investors.
It has clean share class ongoing charges (OCF) of 2.1 per cent, which is well above average for a fund of funds.
Lockyer and Scott also manage the £40m Vanbrugh fund, which has a slightly more defensive mandate. Our data shows that it has been a top quartile performer in the IMA Mixed Investment 20%-60% sector over five years.
Discovery Balanced
Another top-performing DFM-run fund in the IMA Mixed Investment 20%-60% sector is the five-crown rated Discovery Balanced portfolio, which is administered by Quilter Cheviot Investment Management.
The £30m fund has been co-managed by Alan McIntosh and William Buckhurst since August 2010, though it was originally launched in March 2005.
Since the two managers have been at the helm, Discovery Balanced has been the fifth best performing portfolio in the sector with returns of 43.68 per cent, beating its composite benchmark –split 50/50 between the FTSE All Share and FTSE All Stocks indices – by close to 10 percentage points.
Performance of fund vs sector and composite benchmark since Aug 2010
Source: FE Analytics
The fund has also outperformed its sector and benchmark in each calendar year since McIntosh and Buckhurst took over.
Unlike PFS Hawksmoor Distribution, Discovery Balanced uses both collective investment vehicles and direct equity and bonds. The managers hold the likes of M&G Optimal Income, Schroder Oriental Income and GLG Japan Core Alpha, as well as Royal Dutch Shell, Legal & General and GlaxoSmithKline.
They also hold direct government and corporate bonds.
Discovery Balanced yields 3.23 per cent and our data shows that the managers have increased their net distribution over recent years.
While it is not as widely available as the majority of OEICs, Discovery Balanced is available on a number of fund platforms. It has clean share class ongoing charges of 0.85 per cent, making it significantly cheaper than its Hawksmoor rival.
IFSL Brooks Macdonald Defensive Income
For the even more cautious investor, the £17m IFSL Brooks Macdonald Defensive Income fund has been one of the most consistent performers in the IMA Mixed Investment 0%-35% sector in recent years.
Brooks Macdonald, which is listed on the FTSE AIM index, has a well-renowned discretionary fund manager service but also runs a number of funds of funds which are available to the less-sophisticated investor.
Its Defensive Income fund has been managed by Jonathan Webster-Smith since June 2011. According to FE Analytics, over that time it has returned 21.51 per cent, making it the sector’s fifth best performing portfolio.
Performance of fund vs sector since June 2011
Source: FE Analytics
It’s delivered top quartile returns in 2012 and 2013, and with returns of 2.91 per cent, it is up against the sector so far in 2014.
Webster-Smith holds half of his ISFL Brooks Macdonald Defensive Income fund in fixed interest, with M&G Optimal Income, Artemis Strategic Bond, L&G Dynamic Bond and AXA US Short Duration High Yield Bond all featuring in his top-10 holdings.
The manager is close to maxing out his equity exposure and counts the likes of Threadneedle UK Equity Income, Royal London UK Equity Income and Fidelity Enhanced Income as big positions.
The fund has a yield of 3 per cent and has an OCF of 2.14 per cent.
