Multi-asset has been one of the biggest investment trends of late with seemingly more and more launches and marketing than any other type of fund heading to those in the Investment Association’s Flexible or Mixed Investment sectors.
With the likelihood of a new government in the UK in just a few weeks and the potential of a new monetary environment if US rates rise from historic lows in June, many expect multi and mixed asset funds can help those who want to outsource their asset allocation for the longer term.
In fact the majority of investment advisers are prepping their clients’ portfolios for greater exposure to multi-asset funds to give them further diversification, according to recent survey.
Here we take a look at five portfolios that are managed by or in part by FE Alpha Managers and also have strong long-term track records but who may not be as familiar to a non-specialist as some of the biggest name in the multi-asset and mixed investment space.
McInroy & Wood Income and McInroy & Wood Balanced
In the IA Mixed Investment 40%-85% Shares sector, FE Alpha Manager Victor Wood runs two portfolios: the £300m McInroy & Wood Income and the £465m McInroy & Wood Balanced funds. The manager has headed up the two since 1990 and 1994 respectively, making him one of the longest running managers in the multi-asset space.
Both funds have beaten their sector by a respectable amount over the longer term with the Balanced portfolio the sector’s second best over 10 years, having beaten the sector average in seven out of the last 10 discrete calendar years.
The Income fund has outperformed and is in the top quartile over five and 10-year periods but drops to the bottom quartile over one and three years.
Since 1995, which is as far as our data goes back, both are way ahead of the sector average, having been particularly strong in down markets compared to the peer group as well as broader equity markets.
Performance of funds and sector since 1995
Source: FE Analytics
McInroy & Wood Income and McInroy & Wood Balanced have relatively similar ongoing charges figures (OCFs) of 1.09 and 1.12 per cent. Their respective yields vary more: the Income fund’s is 2.71 per cent and Balanced’s is 1.75 per cent.
This £300m fund has also had more than 20 years of continuity in management with FE Alpha Manager Robin Hepworth at the helm since 1994.
Being a firm believer in long termism and taking a value-stock picking approach has helped Hepworth outperform the IA Mixed Investment 40-85% Shares sector by more than 260 percentage points since launch as well as beating the FTSE All Share by 100 percentage points while delivering lower volatility.
Performance of funds and sector since 1995
Source: FE Analytics
It’s more recent overweight to small and mid-sized companies has not helped so much recently as the fund is bottom quartile over year but retains its top quartile position over five years and is top decile over 10 years.
The fund is included in the FE Select 100 with the FE Research highlighting Hepworth’s cautious approach, combined with a rejection of short-term market movements.
“This has seen the fund do well since 2008 and should continue to stand it in good stead over the long term,” the team said. However they add that he may miss out on some short-term opportunities due to this style.
It has a clean OCF of 0.83 per cent and a 4.05 per cent yield.
Next up is this fund co-managed by Chris Burvill and FE Alpha Managers Jenna Barnard and John Pattullo. Burvill, who runs the fund’s equities, has helmed the £2bn portfolio since 2003 while Pattullo and Barnard have managed the fixed interest portion since 2012.
Performance has somewhat disappointing of late, with the return of 7.29 per cent over one year lagging the sector and putting the fund in the bottom quartile.
The fund is also on the FE Select 100 with our analyst team backing its strong track record in falling markets like 2008 and 2011. However they note that it has tended to fall behind peers in sharply rising markets such ad 2007 and 2009.
“Since 2011 the weighting to equities has been high, which helped the fund do very well in 2012 and 2013. However, [in 2014] this hurt performance and the manager has decreased equities slightly,” the team said.
“Burvill has been putting more in cash, having started to do so in early 2013. This has reduced the risk on the fund in 2014 but limited returns. He thinks bonds are too expensive and is holding cash to be able to buy them back when they fall in price.”
“This means the fund is likely to do best if the economic news and stock market performance is good. The cautious nature of the portfolio should mean that any downside is limited if the news is bad. A high cash weighting will also reduce the income from the fund.”
It has a clean OCF of 0.72 per cent.
FE Alpha Manager Iain Stewart, while a reasonably well-known manager for his £9.8bn Newton Real Return fund that is popular with advisers, also co-manages this much smaller fund.
Alongside co-manager Matthew Brown, Stewart has been the manager of the £2.8bn Newton Multi-Asset Balanced fund since 2005, since when it has returned 117.94 per cent while the average fund in the IA Mixed Investment 40%-85% Shares sector gained 94.47 per cent.
Performance of fund and sector since 2005
Source: FE Analytics
Core part of this outperformance comes from Stewart’s sector-beating performance in the down markets of 2008-9 as the financial crisis unfolded and markets went south. The fund lost about 20 per cent over this period while the sector’s average drop was 10 percentage points higher.
However, the fund is currently toward the top of its equity exposure with about 75 per cent of the portfolio in stocks, led by those in the UK, Europe and the US.
The fund has a clean OCF of 0.68 per cent and a yield of 2.31 per cent.