Both multi-asset funds’ emphasis on downside protection has seen them underperform their IMA Flexible Investment sector in recent years – though Troy stresses that absolute rather than relative performance is its priority.
Spectrum has held up better than its much larger counterpart during the difficult period for the group, however, returning 6.95 per cent over one year compared to Trojan’s 3.85 per cent, and 13.25 per cent over three years compared to Trojan’s 6.33 per cent.
It’s also ahead over five years, but a whisker behind since its launch in February 2008.
Source: FE Analytics
Troy Spectrum’s numbers have been by no means spectacular, but investors in anything with Troy in the name should know what they’re getting – a naturally cautious fund that tends to underperform during fast rising rallies, but outperform during times of stress.
Indeed, the fund’s performance has significantly improved in 2014, which has been a far more uncertain period for risk assets compared to 2012 and 2013.
Spectrum is a top-quartile performer year-to-date, with returns of just under 6 per cent.
If you’ve become more cautious of late and are looking for a core defensive holding, it is one that may be of interest.
Sebastian Lyon (pictured) and Francis Brooke, managers of Trojan and Trojan Income respectively, have run the fund since launch.
Tom Yeowart, formerly of Rothschild Wealth Management, joined the team earlier this week.Spectrum is a multi-asset unfettered fund of funds, investing in equities, bonds, commodities, property and other alternatives.
It is one-stop-shop for investors looking for a single solution, with both the asset class split and the underlying funds themselves providing diversification benefits.
The fund can hold up to 100 per cent in equities, but the team’s scepticism of the global economic recovery has led the weighting to be much lower than this.
Cash was as high as 13 per cent earlier this year but the weighting has come down to 5 per cent more recently, while equity exposure is hovering around the 65 per cent mark.
Gold and gold equity funds – a natural hedge against inflation – have a 10 per cent exposure, with absolute return and index-linked bonds also making up sizeable positions.
Lyon, Brooke and Yeowart favour large-cap focused funds run by established teams.
Top-10 positions include Findlay Park American, First State Asia Pacific Leaders, CF Ruffer European, BlackRock Gold & General and Lindsell Train Global Equity.
Lyon’s Trojan fund is also multi-asset, though it invests in stocks and shares rather than other funds.
There are other key differences as well; Trojan is generally more risk averse with just 42 per cent in equities, 25 per cent in index-linked bonds and 19 per cent in cash and near-cash.
Unlike the Trojan fund, Spectrum is prepared to invest in Japan and currently has 11 per cent in the country. This contributed to the latter’s much better performance in the early months of 2013.
Spectrum also tends to have more in emerging markets and especially Asia, which Trojan tends to shy away from.
In spite of Spectrum’s greater exposure to risk assets, the fund has only been marginally more volatile in recent years.
FE data shows it has an annualised volatility of 6.22 per cent over three years compared to Trojan’s 5.25 per cent. The IMA Flexible Investment sector average has a score of 8.35 per cent over the period.
The fund’s max drawdown figures – particularly important to Troy – are also similar, with 6.15 per cent for Spectrum and 5.07 per cent for Trojan.
Performance of funds over 3yrs
Source: FE Analytics
While past performance is by no means a guide to the future, the results suggest that Spectrum is best suited to an investor who wants a slightly more aggressive version of Trojan.
While it is likely to lose more money in down markets – as it did in 2008 and 2011 – it’s got more potential on the upside.
The Spectrum fund is more expensive than Trojan, due in part to its fund of funds structure.
It has clean ongoing charges of 1.57 per cent, compared to Troy’s 1.07 per cent. Troy Spectrum isn’t the only fund at the firm that goes under the radar.
The £89m Trojan Capital fund sits in the IMA Global sector, and like all of the portfolios at Troy, has a keen eye on downside protection.
Manager Gabrielle Boyle shares similar concerns over the “false rally” in risk assets as Lyon and Brooke, which has weighed heavily on performance in recent years.
The fund may be of interest to investors who want defensive, core global equity exposure, that would hold up relatively well in a severe market correction.
A high cash weighting and gold, and little exposure to domestic cyclicals has seen her fund drop into the third quartile in recent years.
Capital’s longer-term record in much strong – it is up top quartile in IMA Global since its launch in 2006 – and has again had a strong 2014 in light of growing uncertainty in markets.
Performance of fund and sector since launch
Source: FE Analytics
Boyle has brought down her cash exposure to 8 per cent in recent months.
She has increased her exposure to the US from 26 per cent in January 2013 to 46 per cent at time of writing, in favour of the UK. Asia and emerging markets have next to no exposure in the fund.
Large cap defensive companies such as Roche, Novartis, Microsoft and BAT are all top-10 holdings. Trojan Capital has ongoing charges of 1.12 per cent.
While Trojan, Spectrum and Capital have had a tough time of it in recent years, FE Alpha Manager Brooke’s £1.6bn Trojan Income fund has held up very well.
Our data shows that it is ahead of its FTSE All Share benchmark over one, three and five year periods, and top-quartile in its IMA UK Equity Income sector over one and five years.
Trojan Income, which charges 1.03 per cent, is a member of the FE Select 100. It was recently highlighted by head of FE Research Rob Gleeson as “the best UK fund for income investors”, and will celebrate its 10 year anniversary later this month.
