Recent FE Trustnet research showed how the majority of funds in the IMA Absolute Return sector failed to meet their goal of preserving capital in all market conditions.
Our research suggests investors looking for cautious funds to protect their money in down-markets would be better served by mixed asset funds and may achieve higher returns too.
CF Miton Special Situations Portfolio
James Sullivan and FE Alpha Manager Martin Gray manage this fund, which has produced positive returns in the last nine calendar years.
In 2008, the year of the banking crash, the fund gained 7.26 per cent, while in total over five years it has returned 29.54 per cent.
The portfolio is invested in other funds and investment trusts, as well as equities, bonds and other asset classes.
With returns of 135.4 per cent, it is the best-performing fund its IMA Mixed Investment 40-85% Shares sector on a 10-year basis, with significantly less volatility.
It is also top-quatile over five years, but lagged its sector and benchmark during the QE-fuelled bull market of 2009 and 2010.
Performance of fund vs sector and index over 10-yrs
Source: FE Analytics
The portfolio currently has 34.8 per cent in cash and its largest single holding is a UK Government bond that matures in 2027 and pays a 4.25 per cent coupon.
CF Cautela
This fund, which data from FE Analytics shows has produced positive returns in every calendar year since launch in 2006, was known as the CF Whitefoord Absolute Return fund until November of last year.
The name was changed to avoid the negative publicity surrounding IMA Absolute Return, although the fund has never been housed in that sector and currently sits in IMA Mixed Investment 20-60% Shares.
It has gained 34.94 per cent over five years, significantly outperforming its benchmark of Libor plus 2 per cent.
Performance of fund vs sector over 5-yrs
Source: FE Analytics
"It is not an absolute return fund per se. We do not invest in derivatives or anything that is not directly realisable like property, hedge funds or derivatives," spokesman Allan MacDonald said.
CF Cautela invests in ETFs and in other funds as well as equities and bonds.
Nolan Stanton runs the portfolio, although MacDonald says there is a strong element of collaboration with other members of Whitefoord’s team.
The fund is available with a minimum investment of £1,000 but its total expense ratio (TER) of 1.9 per cent is more expensive than most funds in the mixed asset sectors.
Threadneedle Navigator Cautious Managed
Threadneedle Navigator Cautious Managed is a fettered fund of funds, meaning it only invests in other funds managed by Threadneedle.
In the last decade it has only failed to deliver gains in two calendar years. Losses of 1.56 per cent in 2002 – when its FTSE All Share benchmark lost 22.68 per cent – and 1.51 per cent in 2008 – when the benchmark lost 29.93 per cent – are the only blots on the copybook.
On a five-year basis it has beaten its benchmark, returning 28.18 per cent compared with a loss of 2.5 per cent from the FTSE All Share.
Over 10 years it has outperformed by a smaller margin, with the fund returning 62.76 per cent compared with the benchmark’s 56.12 per cent.
The fund is headed up by Alex Lyle and has a minimum investment of £1,000.
CF Ruffer Total Return
CF Rutter Total Return is managed by FE Alpha Managers David Ballance and Steve Russell and has made 55.29 per cent over five years – the best return of any fund in all the mixed asset sectors.
In 2008 it made 20.88 per cent, which was bettered by few funds in the unit trust and OEIC universe.
The only year it lost money was 2006, when it fell 2.76 per cent.
Investors will need £1,000 to get in, but the fund’s TER of 1.54 per cent is cheaper than most in the mixed asset sectors.
Trojan
Investors can no longer invest in this FE five-crowned fund unless they already hold it and want to top up their exposure, but it shows what good management in the mixed asset sectors can achieve.
FE Alpha Manager Sebastian Lyon has made money in every single year since launch in 2001.
His portfolio has returned 45.29 per cent over three years, 44.05 per cent over five years and 149.11 over 10 years, which consistently puts it in the top-quartile of its IMA Flexible Investment sector.
The portfolio currently has a significant weighting to gold, with 6.7 per cent in bullion and a further 4 per cent in ETFs.
*Managers that have added value to their benchmark every year between 2002 and 2011