The mixed investment sectors often fall into favour among investors during more turbulent times in the market as a means of maximising asset diversification.
Fund-of-funds in particular are seen as attractive options for investors that want low-maintenance and easy-to-manage portfolios. Plus, with all three sectors offering varying degrees of risk, the mixed investment area of the market is able to cater for a broad range of investors.
However, many investors point out that the ongoing charges figures are often higher with multi-asset funds – the average OCF across the sectors is 1.2 per cent compared to the IA UK All Companies’ average OCF of 0.91 per cent.
Having looked through the mixed investment sectors, however, there are indeed multi-asset funds that have reasonable track records, have delivered strong performances and charge well below the average OCF. We take a look at five of these funds in the below article:
Royal London Sustainable World Trust – 0.78% OCF
The first fund on the list is Royal London Sustainable World Trust, which has delivered the highest total return over five years out of all funds in the mixed investment sectors with a below-average OCF.
What’s more, its charges figure stands at 0.78 per cent, which is one of the lowest in the market area.
The £207m fund has been headed up by FE Alpha manager Mike Fox since its launch in 2009 and, over this time frame, it has comfortably doubled its average peer in the IA Mixed Investment 40%-85% Shares sector.
Performance of fund vs sector since launch
Source: FE Analytics
The fund has also done well in terms of its risk metrics, having delivered a top-quartile maximum drawdown (which measures the most potential money lost if bought and sold at the worst times) and a top-quartile risk-adjusted return (as measured by its Sharpe ratio) over the same time frame.
However, it does have a slightly higher annualised volatility than its peer group composite.
Fox looks at global growth trends when selecting stocks and tends to focus on high-profile companies with strong brands – the fund’s largest weightings include the likes of Alphabet, Starbucks, Microsoft and BT. As the fund’s name suggests, it looks for companies with a strong focus on sustainability and places emphasis on themes such as emerging markets and global power shortage.
It currently has a diversified portfolio of 178 holdings, 79.6 per cent of which are mid and large-cap equities from across the globe (although 21.8 per cent of these are FTSE 100 companies). It also holds 14.1 per cent in UK corporate bonds, five per cent in cash and 1 per cent in gilts.
Kames Ethical Cautious Managed – 0.79% OCF
The fund with the second-highest return over five years as well as boasting a below-average OCF is Kames Ethical Cautious Managed, which has been headed up by Audrey Ryan since 2007 and FE Alpha Manager Iain Buckle since 2010.
The five crown-rated fund resides in the lower-risk IA Mixed Investment 20%-60% Shares sector and, although it has a bottom-quartile annualised volatility and an above-average maximum drawdown over five years, it has delivered a top-quartile risk-adjusted annualised return.
In terms of its total returns, the £522m fund has more than doubled the performance of its sector average with a return of 49.5 per cent over the same time frame.
It has managed to provide these returns while maintaining a ‘dark green’ mandate, which means it has a particularly stringent set of ethical criteria. As such, it will not invest in any companies involved in genetic engineering, gambling, alcohol, tobacco, nuclear power, armaments, pornography or that damage the environment in any way with their practices.
The managers tend to have a bias towards smaller and medium-sized companies, although this is mostly the result of their ethical screening process, and Buckle incorporates the fixed income team’s top-down views with Ryan’s company-specific research when building the portfolio.
The Square Mile research team, who have awarded the fund an ‘A’ rating, said: “We have a high regard for the fund managers who have a strong understanding of risk at both an individual position and the aggregate portfolio level.”
Fidelity Moneybuilder Balanced – 0.67% OCF
Next up is FE Alpha Manager Ian Spreadbury and Michael Clark’s £553m Fidelity Moneybuilder Balanced fund, which has four FE crowns and resides in the IA Mixed Investment 40%-85% Shares sector.
The fund aims to provide attractive income as well as growth and does so through a combination of government and corporate bonds as well as shares, which can include preference shares and convertibles.
The fund primarily invests in the UK and currently holds 58.1 per cent in UK equities, 32.7 per cent in global fixed interest, 4 per cent in European equities and 3.41 per cent in North American equities.
Examples of the fund’s largest holdings include 4 per cent Treasury gilts, Imperial Brands, GlaxoSmithKline and 4.5 per cent Treasury gilts.
Fidelity Moneybuilder Balanced has provided a total return of 46.82 per cent over five years, outperforming its peer group composite and benchmark by 19.97 and 14.11 percentage points respectively.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Not only has it outperformed, it has done so with a top-quartile Sharpe ratio, maximum drawdown and annualised volatility over the same time frame, as well as over one, three and 10 years.
The fund has a yield of 4 per cent.
Alliance Trust Sustainable Future Managed
Alliance Trust Sustainable Future Managed is the next fund on the list, which has been managed by Peter Michaelis since 2003 and Simon Clements since 2013.
The four crown-rated fund invests for both growth and income over the long term, which the firm regards as five years or more. As such, its holdings are selected for their long-term prospects as opposed to how well they will do based on the immediate macroeconomic backdrop.
As with a number of the other aforementioned funds, it has a focus on SRI across all of its asset classes – UK equities, world ex UK equities, UK government bonds and corporate bonds – and will look for one of four themes. These are climate change and efficiency, quality of life, risk management and sustainable consumption.
Aside from its SRI screening, the fund also uses its in-house research team for top-down views and also looks for companies that are both undervalued by markets and offer good growth opportunities.
The selection process results in a portfolio of between 40 and 60 holdings – these currently include Visa, Vodafone, Ecolab and Legal & General.
Over five years, the fund has provided a total return of 45.82 per cent, outperforming its average peer in the IA Mixed Investment 40%-85% Shares sector by 18.97 percentage points.
Over the same time frame, it has provided a top-quartile Sharpe ratio, although it does have a higher-than-average annualised volatility and maximum drawdown.
Alliance Trust Sustainable Future Managed yields 1.08 per cent.
Standard Life Investments Dynamic Distribution
The final fund on the list is SLI Dynamic Distribution, which has five FE crowns and has been co-managed by Jacqueline Lowe and Iain McLeod since 2006 and 2015 respectively.
The fund resides in the IA Mixed Investment 20%-60% Shares sector and aims to provide long-term growth through a combination of growth and income holdings.
Currently, the £361m fund has 41.4 per cent in global fixed interest, 35.4 per cent in global equities, 15.2 per cent in property, 3.4 per cent in international equities and 2.6 per cent in alternatives.
While it holds the likes of BT, Vodafone, HSBC and Prudential as some of its largest weightings, its top position is in the SLI UK Property fund at 10.7 per cent.
Over five years, SLI Dynamic Distribution has a provided a total return of 43.76 per cent compared to its peer group composite’s total return of 21.53 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
However, it has achieved this with a bottom-quartile maximum drawdown and annualised volatility, which suggests the fund may not be suitable for investors with a particularly low risk appetite.
