Why I’ve put my inheritance in M&G Recovery
FE Trustnet’s Mark Smith explains why he has bought Tom Dobell’s top-performing equity fund to tuck away some money for the future.
By Mark Smith, Senior Reporter, FE Trustnet
Sunday July 08, 2012
Very few people in their early-20s can afford to worry about the world of investment.
With more than one million unemployed 16- to 24-year-olds in the UK and many struggling to pay off student debt, the chances of people in this age group putting money to work in the stock market are pretty low.
It is also true that few asset managers or financial advisers focus much of their time or resources marketing to this demographic, and if they did they could probably expect to be met with blank faces.
However, it is not unusual for young people to have to suddenly revisit their finances following the unexpected death of a grandparent. I found myself in this position recently and after paying down my debts I was left with a small sum to invest.
With time on my side, my first thought was to buy a fund with exposure to a particularly racy growth story. Funds such as JPM Natural Resources
, Templeton Frontier Markets and Aberdeen Global Asian Smaller Companies
are all highly volatile but have the potential for high returns over the long-term.
However, at 24 and working in my first job since graduating from university, my future is far from certain.
Right now I am dizzyingly out of reach of the ridiculous prices demanded of London property, but there are other considerations: I may lose my job or need to save for a big purchase or wedding.
I can, therefore, ill afford to risk losing the tiny bit of spare cash I have by rolling the roulette wheel in the world’s riskiest markets.
The advantage of investing in the UK is that I will always have a feel for what the economic climate is like, how businesses are doing and, with half an eye on the FTSE every day, I can look out for opportunities to add to my holding or take some profits.
At the start of the year I would have gone for a more aggressive fund such as AXA Framlington UK Select Opps
or Stan Life Inv UK Equity Unconstrained
However, with more uncertainty over the future of the economy, I’ve decided I need something that offers me the chance to perform well should the markets return to growth but will also keep hold of some of that profit if they nose-dive.
This is why I’ve plumped for the £7.4bn M&G Recovery
FE Alpha Manager Tom Dobell (pictured)
invests in companies that are either unloved by the stock market or are going through a period of managerial or structural change and sells them again once they reach a price that reflects what he believes to be fair value.
He told me when I met him in May that he anticipates a boost to the fund when some of his recovery stocks become the targets of merger or takeover bids from cash-rich companies when the economy improves.
The numbers are very, very good and the process has been proved to work over the long-term. M&G Recovery is a top-quartile performer over five and 10 years and has beaten the market in 11 of the last 12 calendar years.
Performance of fund vs sector since 2002
Source: FE Analytics
||2011 returns (%)
|M&G - Recovery
|IMA UK All Companies
Despite the outperformance, the fund hasn’t taken on too much undue risk. Its annual volatility scores over three, five and 10 years are only marginally higher than those of the average fund in the UK All Companies sector.
Dobell also has a higher Alpha score than the vast majority of his competitors.
Aside from the impressive numbers, I also like the fact that Dobell only runs one fund, meaning that he can commit all of his time and resources into thinking about what he is going to do with my money.