The problem is, as Hargreaves Landown’s Mark Dampier recently pointed out, most fund of funds managers have their own targets to hit, meaning that their time horizon is far shorter than their clients’. This often leads them down the road of short and sharp asset allocation bets, which often results in them taking value away from their benchmarks – not adding it.
Some look to niche, offshore funds rather than industry favourites to differentiate themselves from the IFA community, which again can often lead to disappointment.
With this in mind, FE Trustnet looks at three simple, tried-and-tested portfolios that prioritise quality managers and long-term outperformance over short-term gains.
Jupiter Merlin Income
“This is the obvious one that springs to mind when talking about a fund of funds like that,” said Laith Khalal, pension investment manager at Hargreaves Lansdown.
“They tend to make big asset allocation calls every so often but aren’t frequent traders.”
Jupiter Merlin Income certainly falls in to the tried-and-tested category, in that it’s one of the most consistent multi-asset fund of recent years and has been headed up by the FE Alpha Manager duo of John Chatfeild Roberts, Peter Lawery and Algy Smith-Maxwell for over a decade.
Not only has the fund beaten its IMA Mixed Investment sector over the long term, but its outperformed its peer group in each of the last 13 calendar years.
Performance of fund versus sector over 10yrs
Source: FE Analytics
It’s also outperformed its sector on a cumulative basis over a one, three and five year period.
As well as targeting capital growth, Chatfeild-Roberts and his team aim for a competitive, growing income. The fund is currently yielding 3.2 per cent, according to FE data.
The £4.8bn fund holds a number of industry favourites in its top-10, showing that you don’t need to look off the beaten track to have an edge in the sector. M&G Strategic Corporate Bond, Artemis Income and Invesco Perpetual High Income are all major holdings.
Jupiter Merlin Income has five FE crowns. It has a minimum investment of £500 and ongoing charges of 2.36 per cent.
Margetts Select Strategy
“Another group that we really rate in this area is Margetts,” said Khalal. “They’re risk-targeted which might be seen as a bit of a hindrance to their flexibility, but it’s served investors very well.”
“The manager [Toby Ricketts] has a common-sense type approach and goes for well-known managers who are very proven in their field.”
“It’s quite a small outfit and it might not ever be a major player, but it’s definitely worth a look.”
Ricketts, an FE Alpha Manager, heads up a number of fund of funds at Margetts, including the five-crown rated Margetts Select Strategy portfolio, which sits in the IMA Mixed Investment 40-85% sector. He’s headed up the £104m fund since 1995.
Performance of fund versus sector
| Name | 1yr (%) | 3yrs (%) | 5yrs (%) | 10yrs (%) |
| Margetts Select Strategy | 19.40 | 27.94 | 35.67 | 133.01 |
| IMA Mixed Investment 40-85% | 15.12 | 23.21 | 26.43 | 93.85 |
Source: FE Analytics
Our data shows that it’s a top quartile performer in its sector over a one, three, five and 10 year period. Only one other fund – Old Mutual Managed – has also managed this feat.
Like the Jupiter Merlin fund, Margetts Select Strategy opts for high profile UK-listed vehicles to achieve its goals. Among its largest holdings are First State Asia Pacific Leaders, Jupiter European Special Situations, and Liontrust UK Growth.
Ricketts runs a high-conviction portfolio, with the top-10 accounting for over a third of assets under management.
The fund has a minimum investment of £1,000 and an ongoing charges figure (OCF) of 2.26 per cent.
Henderson Multi-Manager Distribution
“Henderson is the other team I’d put in this bracket,” Khalaf said. “They’ve got a very simple approach but have been very effective.”
“[Ex-head of asset allocation at Mercer] Paul O’Conor has recently joined the team, which is a great appointment. They have a very competitive set of managers now.”
Arguably the standout performer in Henderson’s multi-asset team is the five-crown rated Henderson Multi-Manager Diversified portfolio, which is headed up by FE Alpha Manager Bill McQuaker.
With only £42.2m under management it’s not the largest, but its got a very strong cumulative record on both an absolute and relative basis, compared to its IMA Mixed Investment 0-35% sector. However, as the graph shows below, it's been much more volatile over the period.
Performance of fund versus sector over 10yrs
Source: FE Analytics
Rob Gleeson and his FE Research team are big fans of the Diversified fund, and include it in their FE Select 100 list.
While the fund has some high profile names in its top-10 such as Henderson Strategic Bond and Jupiter Strategic Bond, the team points out it also gives retail investors access to vehicles they would find it difficult to hold directly.
“The fund offers exposure to a wide range of funds that retail investors would not otherwise be able to access, such as private equity and hedge funds,” they said.
“Specialist strategies such as these tend to behave differently to most of the major asset classes, meaning the fund offers an excellent method of adding diversification to a portfolio.”
Henderson Multi-Manager Diversified is currently yielding 2.4 per cent, has a minimum investment of £1,000 and an OCF of 1.4 per cent.