One of our own has also been cropping up in the financial headlines this week, following the news that FE Trustnet head of content Josh Ausden is heading to Neptune Investment Management to become its head of client investment strategy. 
Of course, we’ll be sorry to see Josh (pictured) go – he’s been a massive influence on the evolution of FE Trustnet and on the individual members of the editorial team. We wish him all the best and plan to milk him for his fund geekery, impressive contacts book and London restaurant knowledge before he heads off for pastures new in September.
Josh’s new boss, Charlie Parker, said: “Joshua has proved himself as one of the best investment journalists operating today.” We find it hard to disagree with that.
Aside from that, we’ve rounded up some of our favourite stories of the week below. From everyone at FE Trustnet, have a great weekend.
The perfect pairing to replace Standard Life GARS
News editor Alex Paget spoke with Chris Metcalfe, investment director at iBoss, who has been combining two funds as an alternative to holding the popular Standard Life Investments Global Absolute Return Strategies (GARS) fund.
While GARS has performed strongly since launch in May 2008 – outpacing the returns of equities, government bonds and corporate credit – with a lower maximum drawdown than stocks or corporate bonds, Metcalfe notes the strategy is untested in rapidly falling markets like 2007.
“I think there is a danger of judging funds on their performance over the last few years,” he said.
“It is the same with GARS and others like Invesco Perpetual Global Targeted Returns, as no-one knows how all these cross trades will work in a falling market in both bonds and equities – which we think will happen given they have both gone up together thanks to quantitative easing.”
Metcalfe still rates GARS for its good track record of smoothing out returns in the past, but he is trying a new tactic going forward by pairing two funds together – namely Premier Defensive Growth and Threadneedle UK Absolute Alpha.
Performance of composite portfolio versus fund since Dec 2010
Source: FE Analytics
Take another look at the article to find out why.
Should you be selling Schroder UK Dynamic Smaller Companies?
On Wednesday, reporter Lauren Mason took a look at the £534m Schroder UK Dynamic Smaller Companies fund, which has been run by FE Alpha Manager Paul Marriage since 2006.
The fund saw stellar returns between the manager’s start on the fund to the end of 2013, more than doubling the performance of its sector average and outperforming its FTSE Small Cap benchmark more than four times over.
Performance of fund vs sector and benchmark between manager start and 2014
Source: FE Analytics
However, since the fund hard-closed in January 2014 as a result of high inflows, it has delivered what can only be described as a lacklustre performance. In light of this, FE Trustnet asked a panel of financial experts whether it would be prudent to sell the fund or not.
Martin Bamford, chartered financial planner and managing director at Informed Choice, said: “If you’re already an investor in Schroder UK Dynamic Smaller Companies, you should probably stay put.”
“The sector as a whole has fallen out of favour with investors in recent months, but small-caps should reap the rewards as the British economy continues to recover.”
Lucy Walker: Why you should never invest in top-quartile funds
Yesterday, Sarasin & Partners’ Lucy Walker divulged her biggest piece of advice to investors – never invest in top-quartile funds.
While this may go against the fundamental gut instincts of many, the fund manager urged investors to seek out opportunities that are sitting in the bottom quartile.
“I think the most important thing for investors to think about is that investment is cyclical and markets are cyclical. Japan will go in and out of favour, India will go in and out of favour, equities will go in and out of favour, and that’s a much bigger force than any one fund manager can contend with,” she explained.
“It’s why we have a balanced portfolio – that gives me comfort because if I’m not 100 per cent on my base case, which I never am because that would make me arrogant, it makes it more important than ever to have that balance.”
UK fund favourites you shouldn’t rush to sell – despite 2015’s underperformance
The year so far has proven to be a rocky ride for markets, with volatility coming from the likes of the Greek debt crisis, the Federal Reserve’s possible rate hike and turmoil in fixed income, so editor Gary Jackson put some underperforming flagship funds under the spotlight.
One of these was Richard Buxton’s Old Mutual UK Alpha fund, which outperformed its average IA UK All Companies peer in 2012, 2013 and 2014 but has fallen into the fourth quartile this year with a 5.58 per cent gain.
Performance of fund vs sector and index over 2105
Source: FE Analytics
Old Mutual UK Alpha, which has outpaced the sector and benchmark since the manager took over, is one of the few funds that has managed to outperform with a bias to large-caps. Some of Buxton’s more contrarian plays, such as buying into bombed-out miners, have hampered this year’s returns but commentators suggest sticking with the manager.
Adrian Lowcock, head of investing at AXA Wealth, told us: “Buxton has a tendency to get in early into stocks and then wait a while until his expectations are realised. As such I still like the fund and favour it for long-term investors.”
The article also looked at other UK equity favourites, such as Kevin Murphy and Nick Kirrage’s Schroder Income, Martin Cholwill’s Royal London UK Equity Income and Leigh Harrison and Richard Colwell’s Threadneedle UK Equity Alpha Income.
Why your equity fund is not heading for a huge bear market crash
With markets having suffered a bout of weakness in recent months, it was reassuring to hear we are not heading for a cataclysmic bear market in equities.
Senior reporter Daniel Lanyon spoke with Stephanie Flanders, chief market strategist at JP Morgan Asset Management, who says investors can expect markets to see a shorter-tem correction but historical evidence for the causes for a bear market do not stack with current fundamentals.
“We are finding intermediaries, financial advisers, increasingly talking about the possibility of a crash with their clients,” Flanders said.
“But if you look at different asset classes and where they are in the cycle and ask are we on the verge of that kind of crisis now, it doesn’t feel like we have that kind of stress at the moment [as seen in previous crashes] and that we will not see it in the next year.”
“It is not just a case of ‘it has been a long time since we had a bear market, therefore we are going to have a bear market’. However, a correction is perfectly likely - something around 10 per cent decline.”
Ashworth-Lord: How to spot a winning company
Over on Trustnet Direct, Keith Ashworth-Lord, manager of the ConBrio Sanford DeLand UK Buffettology fund, revealed how investors can spot a “winning company” to invest in for the long term.
Ashworth-Lord uses the technique of business perspective investing as espoused by Warren Buffett – or as the Berkshire Hathaway chairman puts it: “All you do is buy shares in a great business for less than the business is intrinsically worth, with managers of the highest integrity and ability. Then you own those shares forever.”
Ashworth-Lord says this is a technique that can be applied by investors of any generation.
“As a general rule, winning companies don’t change their economic shape over time,” he explained.
“Stock market sectors and business classifications certainly change. So do generations of entrepreneurs and the managers of businesses. Fads and cads come and go, usually without much in the way of lasting success.”
“But the companies that sail on from year to year most often have similar characteristics: relatively predictable scalable growth; superior returns on capital and equity; and prodigious cash generation.”