Troy Trojan, Artemis Strategic Assets and HL Multi-Manager High Income are among the funds in the IA Flexible Investment sector benchmarked against the FTSE All Share, according to data from FE Analytics, although each has vastly differing aims and mandates.
This is the first article in an series focusing on the sector, which is often overlooked by investors due to the wide variety of vehicles being housed under one roof.
Because of the challenges that come with monitoring a fund’s performance when it resides in a ‘catch-all’ area of the market, we have decided to break it down into the funds that focus on different regions and asset classes.
Out of 151 funds in the IA Flexible Investment sector, seven of them are benchmarked against the FTSE All Share index.
The largest of these is Troy Asset Management’s Trojan fund, which is £4.2bn in size and has been headed up by FE Alpha Manager Sebastian Lyon since its launch in 2001.
The manager is well-known for his cautious approach to investing and places particular emphasis on capital preservation, as well as providing real growth and income over the longer term.
Performance of fund vs benchmark over 10yrs
Source: FE Analytics
While the fund is benchmarked against the FTSE All Share, Lyon is able to invest across asset classes and in overseas equities. For instance, the fund currently has 29 per cent in cash, 28 per cent in overseas equities, 19 per cent in US index-linked bonds and 10 per cent in UK index-linked bonds.
In fact, the fund currently has just a 10 per cent weighting to UK equities, which is the lowest asset class weighting other than its 8 per cent exposure to gold-related assets.
Over five years, the fund has returned 24.6 per cent compared to the FTSE All Share’s return of 61.47 per cent but has done so with a significantly lower annualised volatility and a lower maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) than its benchmark.
Given its ability to protect investors during market corrections, Trojan has outperformed the FTSE All Share by 4.95 percentage points over the last decade with a total return of 89.53 per cent.
Another household name on the list of IA Flexible Investment funds benchmarked against the FTSE All Share index is Artemis Strategic Assets, which has been managed by William Littlewood since its launch in 2009.The £794m fund aims to provide positive returns under most market conditions, and specifically looks to beat both cash and equities over rolling three-year periods.
To do so, it adopts a multi-asset approach to investing with the intention of performing well when markets are favourable while also protecting capital on the downside when markets are struggling. It is also able to take short positions.
Currently, Artemis Strategic Assets’ equity exposure is mostly UK-weighted at 64.8 per cent. It is also short global government bonds and, in terms of currency, its largest long positions are in the Swedish Krona and Singapore dollar, while its largest shorts are the Japanese yen and sterling.
The fund currently has an 8.9 per cent weighting in gold assets as Littlewood believes many risk assets are overvalued, as is often the case in what he has described in his latest factsheet to be “the late stages of a bull market”.
Ben Willis, head of research at Whitechurch Securities, said his firm invests in the fund as a macro-driven investment.
“We’re effectively buying the expertise of William Littlewood, who constructs a long/short multi-asset class portfolio based on his thematic views,” he said.
“We believe he is a highly skilled manager who has a demonstrable track record as an equities manager and an asset allocator.
“However, we risk rate the fund accordingly as Littlewood will look at long-term absolute return as an objective and there will be periods of volatility as he will back his convictions strongly.”
Over three years, the fund has returned 14.43 per cent compared to the FTSE All Share’s return of 24.35 per cent.
The third-largest fund on the list with an AUM of £492m is HL Multi-Manager High Income, which was launched in April last year by Lee Gardhouse and Ellen Powley.
Since then, (investors should note this is a short time frame to gauge a fund’s capabilities), it has returned 18.04 per cent compared to the FTSE All Share’s return of 22.88 per cent. It has done so with a significantly lower annualised volatility and maximum drawdown compared to the benchmark, as seen in the below graph.
Performance of fund vs benchmark since launch
Source: FE Analytics
The managers aim to distribute a high monthly income that has the potential to grow over the long term. It does so through a portfolio of equity and bond funds, which are regularly reviewed as the managers move between market areas based on where the opportunities lie.
The fund currently has a 60.1 per cent equity weighting – 73 per cent of which are vehicles that invest in UK stocks – and a 39.4 per cent weighting in fixed interest. Examples of its largest holdings include JOHCM UK Equity Income, Marlborough Multi Cap Income and EdenTree Higher Income.
In the fund’s latest factsheet, the managers said: “The fund is invested with some of our favourite equity income, mixed-asset and bond managers.
“It remains early days, but we believe we have constructed a portfolio of high-calibre funds. In a world of low interest rates, we are excited to offer investors a potentially high monthly income.”
Next up is FE Alpha Manager Alex Grispos’ CF Ruffer Equity & General fund, which is £149m in size and aims to provide capital growth through a portfolio of global equities. Its largest regional exposure is currently to North America at 24 per cent, followed by the UK at 19 per cent and continental Europe at 14 per cent.
Given that it resides in the IA Flexible Investment sector, it is able to allocate any weighting to individual holdings. For instance, its largest individual holding is Australian software company Runge at 6.7 per cent, followed by a 6.1 per cent weighting in UK tech development firm Science Group and a 4.1 per cent allocation to Canadian petroleum company Imperial Oil.
Over five years, the fund has returned 47.86 per cent compared to the FTSE All Share’s return of 61.47 per cent.
Performance of fund vs benchmark over 5yrs
Source: FE Analytics
Again, as shown above, it has a significantly lower annualised volatility and maximum drawdown over this time frame.
Other smaller offerings in the sector which are benchmarked against the FTSE All Share are Carvetian Generation, Threadneedle Navigator Adventurous Managed and Threadneedle Navigator Growth – all of which are less than £100m in size.