The new head of investing at AXA Wealth looks after his own pension, investing exclusively in actively managed open-ended funds. He retains a 5 to 10 per cent cash reserve to take advantage of short-term opportunities in the market, predominantly targeting equity-focused managers.
He has a number of core holdings, complemented by racier satellite holdings.
“My largest core holdings are a 10 per cent position in Lindsell Train Global Equity and the same in Giles Hargreave, which is split equally between Marlborough UK Micro Cap Growth and Nano Cap Growth,” he said.
“The Lindsell Train fund is very much a long-term holding. The manager invests in brands that he is confident will still be going strong in 10, 20 years’ time. These are very reliable companies that do sometimes go out of favour, but he’s a patient investor and is very much buy and hold.”
“He doesn’t get caught up in the short term and focuses on the long term, which you want from a core holding. It’s a dependable fund that does well in volatile markets.”
Among Lindsell Train Global Equity’s biggest holdings are FTSE 100 publishing and education company Pearson, Japanese gaming giant Nintendo and Walt Disney. It’s a highly concentrated portfolio of just 25 to 30 companies, investing exclusively in big brand developed market large caps.
The fund has performed very strongly since its launch in March 2011, delivering top quartile returns of 61.34 per cent with below average volatility. This compares to returns of just 30.96 per cent from the IMA Global sector average.
Source: Adrian Lowcock
Lowcock prefers CF Lindsell Train Global Equity to the higher profile CF Lindsell Train UK Equity fund because it is globally focused and is therefore not as dependant on the fate of the UK economy.
He says he’s gone for Marlborough UK Micro Cap over the larger Special Sits portfolio because the former is more nimble, allowing it to concentrate on genuine micro and small-cap companies. The now £811m Special Sits fund now has a sizeable weighting to mid-caps.
He’s also built up in a position in Nano Cap Growth, as he’s also wary of the increasing popularity of Micro Cap.
“Giles Hargreave has been a manager I have admired for many years now and he’s just gone from strength to strength,” he said.
“What I really like about Giles is that although not every stock pick is a winner, he’s very diversified and enough have gone right for him. He’s very good at managing risk in small caps, and isn’t afraid to give up positions quickly if they’re not working for him.”
“The small cap index isn’t heavily reliant on a single company, which allows managers to build diversified portfolios and still outperform. Very rarely does he have more than 2 per cent in a company.”
Lowcock says the proven ability of both Lindsell and Hargreave to protect against the downside while also outperforming over the long term is a massive draw for him.
“It’s the sign of the very best managers. Some volatile managers out there are able to outperform, but those with the most experience know that protecting capital is the priority. Any maverick can outpace a bull market, but the real skill is protecting on the downside.”
Hargreave is one of the best performing managers since the beginning of 2000, delivering returns of 293.58 per cent. This compares to 81.76 per cent from his peer group composite.
Performance of manager and peer group since Jan 2000
Source: FE Analytics
The £245m Marlborough UK Micro Cap Growth fund is the second best-performing fund in its IMA UK Smaller Companies sector since launch in October 2004, with returns of almost 340 per cent. It outperformed its peers in the down years of 2008 and 2011 and has been significantly less volatile than the sector.
Elsewhere, Lowcock has significant exposure to Sebastian Lyon’s £2.4bn Trojan fund, which has a 5 per cent weighting. He views this as his insurance policy, helping him to weather the storm when risk assets sell off.
“He had a poor 2013, but things have been much better in 2014,” said Lowcock.
“All was rosy at the beginning of the year but it certainly doesn’t look like it’s going to end that way. This fund comes into its own in this kind of market.”
“It’s one of the few funds I own that is a diversifier – it protects capital and reduces risk. I’m still quite young and tend to invest in more adventurous areas, but it’s always good to have something like this as a diversifier.”
Trojan has delivered a positive return every year since its launch in 2000 with the exception of 2013, when it lost 3.13 per cent. Lyon (pictured) made 1.11 per cent in the crash year of 2008, compared to an average loss of more than 28 per cent in the IMA Flexible Investment sector.
The manager remains extremely bearish, believing that the global economic recovery is based on false pretences. Gold, cash and index-linked bonds make up the bulk of his portfolio.
Another big theme running through Lowcock’s portfolio is equity income, which has an 18 per cent weighting overall.
“Equity income should be a big part of a portfolio, even for young investors,” he said. “Sometimes the funds take a while to get going, but the compounding impact of income over the long term is compelling.”
In the UK, Lowcock holds FE Alpha Manager Leigh Harrison’s Threadneedle UK Equity Income fund – a five crown rated portfolio which is a constituent of the FE Select 100. This sits alongside the growth-focused Old Mutual UK Alpha fund, managed by Richard Buxton.
Lowcock is currently avoiding Neil Woodford and Mark Barnett, preferring to give them time in their new roles. He hasn’t counted out investing in them in the future, however.
For his emerging market exposure he favours income specialist Jason Pidcock, holding his Newton Asian Income and Emerging Income funds.
"People who invest in emerging markets often try to find the perfect buying opportunity, but I prefer to go down this route,” he said.
Performance of fund, sector and index since launch
Source: FE Analytics
“I see it as a good long-term investment process – Jason Pidcock and Sophia Whitbread have strong dividend discipline which encourages holdings in companies with good balance sheets and good cash flow, and on top of that you’ve got Newton’s global thematic approach.”
“This sums up the way I invest – it’s all about getting rich slow, not quick. I have a 30 to 40 year horizon so I don’t need to take on unnecessary risks. Yes I like to look at risky areas, but try to pick the right managers.”
The £5bn Newton Asian Income fund is a top quartile performer since launch in 2005, returning 175.29 per cent. Pidcock has a tendency to underperform when markets are rising, but protected much better against the downside in 2008 and 2011.
2013 was a difficult year for the manager, leading some to question whether the fund had gotten too big. Lowcock remains relaxed however, and says it’s encouraging to see that the fund is top quartile year-to-date.
Newton Emerging Income only launched in October 2012. It is slightly down versus its IMA Global Emerging Markets sector since then.
Looking at his smaller bets, Lowcock has recently bought holdings in Jupiter China, BlackRock Gold & General and Neptune Russia & Greater Russia. All have had a very difficult three years or so, with the BlackRock and Neptune funds suffering a particularly torrid time of late.
“Have I bought these funds at the bottom? No. But they are at incredibly low valuations,” he said. “They’re only small weightings and the exposure to China is starting to pay off.”
Performance of funds and index over 3yrs
Source: FE Analytics
“I have some exposure to India in my ISA and that has had a great year and I bought it after a similar period of underperformance. These are the kinds of plays that take a while to pay off, but I’m happy holding them at these levels.”
Lowcock prefers funds to trusts because he actively manages his portfolio, putting his cash to work on a regular basis. The trading costs associated with closed-ended funds are a negative in this respect, he says.
“Back in the summer of 2012 when the US market sold off, I drip fed into the market as it fell. I was adding small amounts over a month. If I’d used investment trusts this would have inhibited me, but that’s not the case with open-ended funds.”
He anticipates using the recent fall in markets to add to his holding in Threadneedle UK Equity Income and Newton Asian Income.
While he doesn’t have a high conviction view on Japan or Europe, Lowcock says he likes to be diversified across all major regions and has chosen GLG Japan Core Alpha and FP Argonaut European Alpha for his exposure here.
He is underweight the US, holding a 5 per cent weighting in the Legg Mason US Smaller Companies fund. This complements a larger weighting to a US tracker.
Around 10 per cent of his pension is made up of single stocks – a mixture of mega cap dividend payers such as AstraZeneca and GlaxoSmithKline, and more speculative small cap bets that he has accumulated over the years.
The final 8 per cent is made up by the Invesco Perpetual Tactical Bond fund.
“I think it’s always good to have some bonds as a diversifier,” he said.
“Paul Causer and Paul Read have gotten their timing a little early, but they’ve been very good at identifying certain trends in the market and aren’t afraid to look off the beaten track. I’m not looking for a secure income, so don’t mind investing in a fund like this with a floating yield.”
Lowcock isn’t anticipating a full-scale bond crash in 2015, believing that the sheer volume of news surrounding this eventuality makes it increasingly unlikely.
Previous experts who revealed their pension to FE Trustnet include Mark Dampier and Investec fund manager Max King.
