Guinness Global Equity Income, JPM Global Macro opportunities, and Jupiter UK Special Situations were among new additions to the FE AFI Cautious following the latest rebalancing of the portfolios.
Based on a portfolio of 10 funds put together by a panel of leading UK financial advisers, the FE AFI are portfolios aimed at specific age groups, assuming an investor is saving for retirement at age 65.
Having highlighted the new funds that advisers say any investor can hold – funds with a weighting in each portfolio – and changes to the FE AFI Aggressive and FE AFI Balanced portfolios, in this article FE Trustnet looks at the FE AFI Cautious portfolio.
The FE AFI Cautious portfolio is suitable for a person in their late-50s and therefore includes a number of lower-risk strategies.
Over 10 years, the FE AFI Cautious has made a total return of 96.32 per cent underperforming the average IA Flexible Investment peer, which has made a 121.96 per cent return.
Performance of indices during H1 2019
Source: FE Analytics
During the first half of the year, FE AFI Cautious portfolio has returned 8.25 per cent, while the IA Flexible Investment sector peer group rose by 10.64 per cent.
With some advisers making allocations to their chosen funds across several portfolios there were a number of funds from the other two portfolios added to and taken out of FE AFI Cautious, such as Mark Barnett’s Invesco Income and the £2.5bn M&G Global Dividend fund managed by Stuart Rhodes, John Weavers and Alex Araujo.
The £3.3bn Artemis Global Income fund overseen by veteran investor Jacob de Tusch-Lec was one of the biggest names leaving the sector after the £5.9bn Merian Global Equity Absolute Return fund, which was withdrawn from both the Balanced and Cautious portfolios.
Artemis Global Income was up by 11.76 per cent during the first half of the year, lagging the IA Global Equity Income peer group’s 14.16 per cent gain and a 16.31 per cent return for the MSCI AC World index.
For Darius McDermott, managing director of Chelsea Financial Services, the decision to remove the Artemis Global Income but highlighted recent underperformance and outflows from the fund, prompting it to swap in the Guinness Global Income
“We still retain a lot of belief in the Artemis Global Income fund, but it has had a shorter period of disappointing performance and is having some outflows plus the Guinness [strategy] is more of a core global income product with lower volatility,” he said.
Another notable exit from the portfolio was the £1.1bn M&G Global Macro Bond fund overseen by lead manager Jim Leaviss and deputy and FE Alpha Manager Claudia Calich, which slightly underperformed the IA Global Bonds peer group’s 6.12 per cent gain during the first half with a 5.89 per cent total return.
There were a number of new funds joining the FE AFI Cautious portfolio as well as Guinness Global Equity Income.
One of the biggest names was the five FE Crown-rated Liontrust Special Situations fund overseen by Anthony Cross and Julian Fosh. The £5bn fund has been a strong performer in recent years due to its quality growth focus and was also added to the Aggressive and Balanced portfolios.
Another new addition was the JPM Global Macro Opportunities fund overseen by FE Alpha Manager Shrenick Shah. The £1.5bn multi-asset strategy and is held on the FE Invest Approved List who highlighted its focus on risk management and robustness over “very different investment environments”.
It was up by 3.59 per cent during the first six months of the year compared with a 2.73 per cent gain for the average IA Targeted Absolute Return peer (although it should be noted that the sector is home to a range of strategies).
LF Miton European Opportunities also appeared in the new FE AFI Cautious portfolio, overseen by Carlos Moreno and Thomas Brown. The five FE Crown-rated fund has made a total return of 27.04 per cent against a return of 16.71 per cent for the average IA Europe Excluding UK peer during the first half.
Finally, another fund of note appearing in the Cautious portfolio was the L&G Multi-Index 5. It is one of two that have been added across the portfolios (with L&G Multi-Index 7 added to the Aggressive and Balanced portfolios).
Chris Wise, managing director of Whinchat Financial Planning, said the passive range offers beta exposure to markets when they rise at a lower cost than active multi-asset strategies.
“What we’ve seen more in the multi-asset space, [is that active funds have] probably not given us much return because the managers are cautiously positioned – and rightly so, in terms of Brexit and trade tariffs – but it means you’ve not had much upside from the market rally.”
He added: “The L&G funds give us beta exposure across asset classes and, rather than being reliant on multi-asset teams, we’re going to get that direct beta and we get it at a lower cost.”