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The Share Centre’s six funds to diversify your portfolio

06 March 2018

The Share Centre investment manager Sheridan Admans highlights six funds he believes will help investors put together a well-diversified portfolio.

By Maitane Sardon,

Reporter, FE Trustnet

Pyrford Global Total Return, Fundsmith Equity and LF Miton UK Multi Cap Income are among six funds highlighted by The Share Centre’s Sheridan Admans that that can help diversify investors’ portfolios.

Admans (pictured), investment manager at The Share Centre, also picked out GAM Star Credit Opportunities GBP, Legg Mason Japan Equity and Threadneedle US Equity Income as potential diversifiers.

Below, Admans considers the funds in greater detail.

 

GAM Star Credit Opportunities GBP

First up on the list is GAM Star Credit Opportunities GBP, which Admans said may be attractive to investors seeking high income returns but are worried about the interest rate environment.

Overseen by FE Alpha manager Anthony Smouha and Gregoire Mivelaz, the £1.1bn fund’s main aim is to achieve capital growth by investing across various bond categories, currencies and countries on a global basis.

Admans said: “This fund invests in the subordinated corporate bond issues of investment grade business, a style of investing that assumes there is a small likelihood of a default on a subordinated high yield issue from a high-quality issuer such as Vodafone, HSBC Holdings or Prudential for example.”

He also highlighted the use of floating rate notes (FRN) as another key attraction of the strategy, a combination Admans said should “provide a cushion regardless of rising or falling interest rates” as well as convertible bonds.

Performance of fund vs sector and benchmark over 3yrs

 

Source: FE Analytics

“FRN notably provides insurance against an unexpected future rise in interest rates and importantly, convertibles should also outperform in a rising rate environment,” he added.

Over three years, the five FE Crown-rated fund has been a top quartile performer, delivering a total return of 28.18 per cent compared with a 9.66 per cent gain for the average IA Sterling Strategic Bond fund, as the above chart shows.

GAM Star Credit Opportunities GBP has an ongoing charges figure (OCF) of 1.18 per cent and a yield of 3.75 per cent.


 

Pyrford Global Total Return

Next on the list is the £2.8bn Pyrford Global Total Return fund, highlighted by Admans as an option for investors looking to beat inflation while taking less risk than the broader market.

“The funds goal is to preserve capital with the managers aim not to lose money over a 12-month period, beat inflation and to do this by a significant margin over the long-term and deliver returns with less volatility than the broader UK equity market,” he explained.

“This fund gives investors access to a simple absolute strategy that seeks stable returns in a multi asset fund that avoids the use of derivatives and selling short stocks.

“The fund though does use currency forwards. Unlike many absolute funds the turnover of assets in this fund has been historically low.”

“On the fixed income side, the fund only invests in high quality government bonds.”

Pyrford Global Total Return is overseen by BMO Global Asset Management’s Tony Cousins, who has run the strategy since launch in 2009. Over that time the fund has delivered a 50.95 per cent total return compared with a 123.25 per cent gain for the average IA Flexible Investment sector peer.

Pyrford Global Total Return has an OCF of 1.06 per cent.

 

LF Miton UK Multi Cap Income

For more UK-focused income investors, Admans tips the LF Miton UK Multi Cap Income fund run by FE Alpha Manager Martin Turner alongside veteran investor Gervais Williams.

According to Admans, Turner’s bottom-up investment approach aims to provide shareholders with an attractive level of dividends coupled with some capital growth over the long term.

Turner invests across the broad market capitalisation spectrum of UK-listed companies, which Admans belives “provides some broad diversification for investors” while uncertainty remains over Brexit and the direction of sterling.

“This fund offers investor’s access to an equity income stream that is diversified across the market small, mid and large capitalised companies,” he added.

Turner and Williams’ distinctive investment approach and ability to identify smaller companies that can grow irrespective of the market direction are among reasons why the fund is included on the FE Invest Approved List.


 

The analysts described the managers’ approach as robust and good for investors who want to benefit from investing in less well-known companies.

Top fund’s holdings currently include Stobart Group, IG Design, FTSE 100 Put Options, Safecharge International Group and Amino Technologies.

Performance of fund under Turner and Williams

 

Source: FE Analytics

Since the fund’s launch in 2011, the fund has generated a total return of 158.51 per cent compared with an 81.97 per cent gain for its average peer in the IA UK Equity Income sector.

Miton UK Multi Cap Income has an OCF of 0.82 per cent and has a yield of 3.96 per cent.

 

Fundsmith Equity

The third fund is the £13.8bn Fundsmith Equity, which is overseen by business founder and well-known asset manager Terry Smith.

According to Admans, Smith’s high conviction and highly concentrated portfolio with a long-term ‘buy and hold’ strategy differentiates it from many others in the IA Global sector.

“Investors should appreciate that the portfolio is more defined by the companies it will not invest in, rather than those it does,” said The Share Centre investment manager.

A key defining characteristic of Smith’s investment style is his preference for defensive companies who are resilient to change, specifically to technological innovation, said Admans, who noted that Smith also likes those companies with existing advantages that are difficult to duplicate.

As a result, Smith has some industry biases such as consumer staples, manufacturers or medical device producers.

Smith also looks for companies which reinvest their cashflows and do not require significant leverage to generate returns.

Since launch, the fund has returned 254 per cent compared with a 96.56 per cent rise for its average IA Global sector peer and a 131.05 per cent gain for the MSCI World index.

Fundsmith Equity has an OCF of 1.05 per cent.


 

Legg Mason Japan Equity

Hideo Shiozumi’s five FE Crown-rated Legg Mason Japan Equity is Admans’ pick from one of his most preferred regions.

Shiozumi, employs a bottom-up, growth-orientated stockpicking approach and often favours small- and mid-caps, which has led to strong outperformance in the past but high levels of volatility.

“This particular fund seeks to benefit from the economic, demographic and structural changes that the country is continuing to face into,” said Admans.

“The portfolio will vary between 25-60 stocks, with the lower the number clearly indicating the strength and conviction the manager has in those companies.”

He added: “Around 80 per cent of the portfolio will be seen as core long-term holdings, whilst the remaining 20 per cent will be used for more short-to-medium tactical investments.”

The fund has the flexibility to invest across the entire market cap spectrum and includes Nihon M&A Center, Peptidream, M3, Outsourcing and Nintendo among its biggest holdings.

Admans said the fund would be suitable for those seeking the potential for strong growth, but warned investors should be prepared for higher volatility.

Performance of fund vs sector & benchmark since launch

 

Source: FE Analytics

The fund has comfortably outperformed its average IA Japan sector peer and the TOPIX benchmark since it was launched in 2012, delivering a 607.87 per cent total return compared with a 90.04 per cent gain for the average sector fund and a 74.53 per cent gain for the benchmark.

Legg Mason Japan Equity has an OCF of 1.01 per cent.

 

Threadneedle US Equity Income

The last fund highlighted by Admans is Threadneedle US Equity Income which has been overseen by Nadia Grant since 2016.

The fund includes large multi-national names such as Apple, Microsoft, Cisco, Pfizer among the portfolio’s top holdings.

“The fund has larger positions in consumer staples, energy and real estate, the latter is an area of which Grant has a solid background, which goes to support the higher index weighting in the fund,” he added.

“It is most suitable for investors seeking large and mid-cap equity income exposure from the US who believe the economic expansion story has some way to go.”

Under Grant the fund has returned 37.66 per cent compared with a 41.71 per cent gain for the average IA North America sector fund and a 42.57 per cent return for the S&P 500 benchmark.

Threadneedle US Equity Income has an OCF of 0.89 per cent and a yield of 2.60 per cent.

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