All performance data presented by FE, including that on FE Trustnet, takes charges into account, but past performance is of course no guide to the future and investors rightly believe that they have a greater chance of outperforming if costs are kept to a minimum.
Lower charges do mean that fund groups have less money to spend on research and personnel, which often wipes out the advantage a cheap fund has anyway. Finding the right balance, therefore, is crucial.
Here we look at the winners across the IMA Mixed Investment and IMA Flexible Investment sectors.
Standard Life Global Advantage – OCF of 1.35%
The team responsible for the higher profile Standard Life GARS runs this £536m fund, having took it over at the beginning of 2011.
Sitting in the IMA Mixed Investment 40%-85% Shares sector, it is much more equity-focused than its counterpart, and is therefore designed for investors with a higher risk appetite.
Guy Stern and his team use the same three-process structure that has benefited the GARS fund in recent years. The strategic team is responsible for macro ideas, the multi-asset team implements these ideas via its access to numerous asset classes such as equities and bonds, and finally the risk team ensures the portfolio is not overly skewed to a single area.
It is a lot simpler to understand than the GARS fund though, investing only in equities, bonds and cash. The team does not use short, market neutral or directional strategies.
Equity exposure is currently at 82 per cent, putting it right at the very threshold. The biggest positions tend to be in established large caps such as BHP Billiton, BP and Vodafone. The remaining 18 per cent exposure is split between cash and bonds.
Since January 2011, the fund has performed very strongly, beating its IMA Mixed Investment 40%-85% Shares sector average and benchmark with returns of 24.51 per cent. It has been slightly more volatile though.
Performance of fund and sector since Jan 2011
Source: FE Analytics
This strong performance has ensured that the five crown-rated fund is also a top-quartile performer in its sector over three, five and 10 years.
The FE Research team, headed up by Rob Gleeson, rates the fund highly, seeing it as an underrated option given the higher profile of GARS.
“This fund benefits from the strength of the team, which is well resourced, highly structured and thoroughly experienced,” Gleeson said.
“This process involves 32 people and thus lacks some flexibility. They update their market views on a quarterly basis; although a lot can happen in financial markets between these reviews, this allows the team to focus on long-term performance only and prevents them from being distracted by market noise.”
With ongoing charges of 1.36 per cent, Standard Life Global Advantage is one of the cheaper multi-asset funds out there. It requires a minimum investment of £500 and is available across most major platforms.
Jupiter Distribution – OCF of 1.39%
This five crown-rated vehicle is another cheap option, with ongoing charges of just 1.39 per cent.
It is run by the duo of Alastair Gunn (pictured) and Rhys Petheram, who aim for a sustainable income and growth by investing in equities and bonds. It sits in the IMA Mixed Investment 0%-35% Shares sector, meaning that it is always mostly in fixed interest. Equity content is currently close to its maximum 35 per cent level, though. Gunn is responsible for all equity exposure, while Petheram is in charge of the fixed interest component.
Most of the managers’ debt exposure is in investment grade, with just 3 per cent in bonds with a BB-rating and below.
Jupiter Distribution has a long and established track record, beating its sector average over one, three, five, 10, 15 and 20 years. Its numbers are also good since the duo took over in mid-2010.
Performance of fund and sector since July 2010
Source: FE Analytics
It has also been consistently less volatile, coping particularly well during market falls.
Gleeson and his team include it in the FE Select 100, believing it is one of the very best funds of its kind.
“The fixed interest portion protects investor capital while the equity portion should provide some growth,” they explained.
“Investors should profit from this situation as the two co-managers are young and talented individuals in their respective areas.”
“As an illustration, Gunn has recently been appointed manager of the Jupiter High Income fund – a promotion that highlights his strong stockpicking skills,” they added.
As recently as yesterday, Petheram was also appointed manager of the High Income fund, in place of FE Alpha Manager Ariel Bezalel.
Jupiter Distribution requires a minimum investment of £500 and is currently yielding 3.4 per cent. Dividends are paid out monthly, making the fund ideal for anyone in retirement.
Fidelity Moneybuilder Balanced
This £320m product is very similar to Jupiter Distribution, though tends to have a higher equity content. It sits in the IMA Mixed Investment 40%-85% Shares sector, with equity exposure currently at around 70 per cent.
Michael Clark is in charge of equities, while FE Alpha Manager Ian Spreadbury looks after the bonds.
It is a cautiously managed fund, with the bulk of exposure in large cap dividend payers and investment grade debt. GlaxoSmithKline, AstraZeneca and a gilt coupon that expires next year are the managers’ three biggest holdings.
Like Jupiter Distribution, the fund pays dividends out monthly, and is currently yielding 4.38 per cent.
It has consistently outperformed its IMA Mixed Investment 40%-85% Shares sector average and composite benchmark – split 65/35 between the All Share and the FTSE Government Bond All Stocks indices – with less volatility.
However, thanks to its larger equity content, it has been a more volatile option than Jupiter Distribution, and has lost far more during market sell-offs.
Performance of fund, sector and index over 10yrs
Source: FE Analytics
With ongoing charges of just 1.2 per cent it’s the cheapest on the list. It has a minimum investment of £500.
