The contest between Democrat candidate Hillary Clinton and Republican hopeful Donald Trump has been one of the bitterest on record and although the vote will take place in less than a month, many expect uncertainty to continue after the result is known.
John Monaghan, senior investment analyst at Square Mile, said: “If the recent EU referendum has taught us anything it is to expect the unexpected. One thing that can be sure about the US presidential election is that it will continue to cause uncertainty and markets do not thrive on uncertainty.
“As polling day approaches, markets could become spooked once again and whilst many fund managers might try to shape their portfolios to benefit from (or protect against) either candidate winning, we believe it is unlikely they will be prepared to ‘bet the ranch’ – an observation borne out of our experience of the Brexit vote.”
AXA Sterling Credit Short Duration
This £509m fund has been managed by Nicolas Trindade since launch in November 2010 and over this time it has lagged its average IA Sterling Corporate Bond peer with a 16 per cent total return. However, this is not too surprising given the rally in long-duration assets over recent years.
Performance of fund vs sector since launch
Source: FE Analytics
Monaghan says the “relatively simple” fund could be a good option for a cautious investor who is willing to tolerate a higher level of volatility than cash while generating an income over time. Trindade builds a portfolio split across diverse sector, issuer, rating and maturity levels, with volatility and interest rate risk being minimised by owning securities with maturities of less than five years.
“The fund may be attractive to investors who are sensitive to the capital volatility of their investments and wish to preserve capital over the longer term, but who still require some level of income. There may be some shorter-term volatility and capital preservation is not guaranteed over any time period,” he added.
“Generally speaking the fund is likely to behave in a defensive manner, performing well relative to the wider corporate bond market during periods of volatility and negative returns, but lagging, perhaps substantially, during periods of stronger market returns.”
AXA Sterling Credit Short Duration has a clean ongoing charges figure (OCF) of 0.43 per cent and is yielding 1.60 per cent.
Newton Global Dynamic Bond
Paul Brain has managed this £1.7bn fund, which resides in the IA Targeted Absolute Return sector, since its launch in June 2006. It has the aim of making a minimum annual return of cash plus 2 per cent over five-year periods; it’s made 67.17 per cent since inception, albeit after a lacklustre start.
Performance of fund vs sector and index since launch
Source: FE Analytics
Like most Newton funds, the portfolio is managed off the back of a cautious outlook on markets – supported by the asset management house’s global thematic process – and Brain has capital preservation firmly in mind.
Brain invests across a mix of developed market government bonds, investment grade credit, sub-investment grade credit and emerging market sovereign bonds. Investment grade currently accounts for 27.3 per cent of assets, with 18.4 per cent in floating rate notes and 13.3 per cent in quasi-government securities.
“It is an attractive proposition for investors seeking access to various parts of the global fixed income markets, but are mindful of the capital volatility of their investments. However, investors should be aware that the manager invests with a three-year time horizon in mind and that over shorter time periods there could be some capital volatility,” Monaghan said.
“We believe that the focus on downside risk should provide suitable capital preservation over longer time periods. Income generation is a secondary consideration and can vary over time, but we feel the fund's investments into fixed income instruments should generate an attractive yield.”
Newton Global Dynamic Bond has an 0.81 per cent clean OCF and yields 2.75 per cent.
Threadneedle Dynamic Real Return
This £278.8m fund, managed by Toby Nangle, achieved a five FE Crown rating as soon as it was eligible after hitting its three-year track record over the summer. Since being launched in June 2013, the fund has made 22.11 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
Nangle describes the fund as being designed to appeal to “greedy, fearful investors” as his asset allocation approach is intended to participate in rising markets but protect capital in more challenging times. The manager aims to alter the fund’s allocation in order to suit the environment, without taking an uncomfortable level of risk.
“Columbia Threadneedle has an impressive track record of successful asset allocation and we see this as a strength of the group. A key attribute of their success is the firm-wide focus on collaboration and idea sharing. We view this fund as a natural extension of what the group’s multi asset team has been doing successfully for a number of years,” Monaghan said.
“However in this instance, it is managed using an unconstrained approach, allowing full flexibility to invest across multiple asset classes. Despite the approach, the manager does not attempt to minimise capital drawdown and investors should be aware that this is not an absolute return vehicle and investor capital may vary over time.”
Threadneedle Dynamic Real Return has a clean OCF of 0.94 per cent and is yielding 1 per cent.