In times of uncertainty, investing in a manager with a proven track record is the best way for investors to protect their capital, according to the Andy Parsons, head of investment research at The Share Centre. 
Though the market seems to be performing well at the moment, despite an initial setback from the Brexit vote, it is not too early to think about holding a fund to anchor your portfolio.
GDP figures released last week showed the UK economy performed well in the run-up to the EU referendum, but many analysts expect the economy to significantly slow in the coming months, with the potential to go into a full-blown recession.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says other data including the recent flash PMIs, which showed the UK economy contracting at the quickest pace since the start of 2009, suggest GDP is on course to contract in the third quarter.
With this in mind, now is a good time for investors to consider adding a fund or two to give themselves a degree of protection.
“Investors continue to want to benefit from the expertise and knowledge of one of the industry's most highly respected fund managers,” Parsons said.
However, with so many to choose from, it can be difficult to decide which is right for you, and Parsons suggests choosing a manager that has seen it all as they are more likely to deliver if the markets take a turn for the worse.
Below, he outlines four managers that have been through a number of market cycles, and outlines why he would look to add them to anchor his portfolio.
“Neil – everyone’s got Neil,” Parsons said.
The UK’s most renowned fund manager, Neil Woodford (pictured) now runs CF Woodford Equity Income, having previously headed up the highly successful Invesco Perpetual range, and is an obvious choice for most investors.
“The CF Woodford Equity Income fund may be suitable for income investors that are seeking a 'steady as you go' manager with a strong, long and reliable track record and the ability to provide a rising level of income,” Parsons added.
The £9.1bn fund, which predominantly holds defensive stocks including pharmaceuticals and tobacco companies, has performed very well since its launch in 2014, outperforming its peers and benchmark, as the below chart shows.
Performance vs sector and benchmark since launch
Source: FE Analytics
However, Parsons points to the FE Alpha Manager’s exposure to small and unlisted companies as a key attraction to the fund, as well as its defensive strategy.
“Whilst the core of this portfolio is defensive and less susceptible to extreme market volatility, Woodford has remained firmly of the belief that small and occasionally unlisted companies in the UK have the potential to be successful and is therefore prepared to also invest in these,” Parsons said.
“Such companies will only constitute a very small part of the overall portfolio however, they can be pivotal to the fund’s journey and potentially add excitement and punch.”
Woodford’s successor at Invesco is another that investors should be looking to add in times of market uncertainty, according to Parsons.
“You’ve got three opportunities – income, high income or strategic income,” he said, with his preference being the £1bn Invesco Perpetual UK Strategic Income fund, which Barnett has a longer track record on and has a higher weighting to mid-caps.
Many will immediately look at the Income and High Income, formerly run by Woodford, but Parsons says he would rather something “slightly punchier”.
Like Woodford, the five crown-rated fund, run by FE Alpha Manager Mark Barnett, focuses on tobacco and pharmaceutical companies, but has a range of sector exposure in its top ten holdings, including BP and BT.
Over the last five years, the fund has performed ahead of its sector and the FTSE All Share, and has done so while being in the top decile for volatility.
Performance of fund vs sector and FTSE All Share
Source: FE Analytics
It is also has the lowest maximum drawdown – the most an investor could have lost if buying and selling at the worst possible time – among its peers, showing it has been remarkably consistent throughout the period.
It was one of the top performers during the bear market in 2011, and, looking further back, performed in the top decile among its peers during the financial crisis in 2008.
Another UK fund Parsons rates highly is the five crown-rated Rathbone Income portfolio, managed by Carl Stick.
“Carl Stick is very prudent - another one who I think has got a real strong track record of delivery and someone who always does what they say on the tin.”
He too is heavily weighted to the pharmaceutical sector, but also holds oil major Royal Dutch Shell and mining giant Rio Tinto among his top ten holdings thanks to his more value/contrarian style.
Over five years the fund (which was recently booted out of the IA UK Equity Income sector for failing to meet the yield requirement) has outperformed the IA UK All Companies sector and its benchmark, and has been one of the steadiest, with only nine per cent volatility.
Performance of fund vs sector and FTSE All Share
Source: FE Analytics
The fund is also in the top decile for maximum drawdown.
While the fund did not perform well during 2008, landing in the bottom quartile among its peers after Stick was caught holding a number of leveraged companies, it was in the top quartile in 2011.
Finally, for investors looking for security outside the UK, Parsons suggests looking at FE Alpha Manager Terry Smith, who runs the five crown-rated Fundsmith Equity fund.
“I really like Terry Smith,” he said, adding that, while the fund is global, it is very concentrated, focusing on large, stable companies.
“It’s not going to catch a rally, but it’s going to look after me in times of market volatility and uncertainty and that’s what I want.”
The fund, which has been the top performer in its sector over a one, three and five year period, holds mainly large US companies, including the likes of Johnson & Johnson and tobacco companies imperial tobacco and Philip Morris.
“The fund has a preference for defensive companies that are resilient to change and technological innovation, and which have existing advantages that are difficult to replicate,” Parsons said.
A look at the data shows it has been very consistent, with the fund outperforming its sector and benchmark since its launch in 2010.
Performance vs sector and benchmark since launch
Source: FE Analytics
A year-on-year breakdown also proves Parsons’ point, with the fund returning 8.36 per cent to investors in 2011, the only true bear market since its launch, compared to losses in the sector and from the MSCI World index.
Additionally, while it didn’t shoot the lights out in 2012 and 2013, when a bull market was in full flow, the £7.8bn still made decent returns and was in the second quartile among its peers.
“It is suitable for investors who take a long-term view when investing, and are comfortable investing in a concentrated globally exposed portfolio while taking a medium level of risk,” Parsons said.
