Much has been made of the ‘goldilocks’ environment of low inflation and steady economic growth that has characterised the last two years in markets.
With volatility beginning to pick up markets could be beginning to change – yet it seems like forever than commentators have been speculating the end of the bull run or the rotation from growth to value investing.
It is a generally-accepted when investing that at certain times portfolios will look brilliant and at other times they will look disastrous.
For those with a more balanced approach wishing to take advantage of a large proportion of the upside while also mitigating the number of high octane spikes in volatility it is important to take a long-term view.
As such, with just one week left to make full use of this year’s £20,000 ISA allowance, FE Trustnet looks aia ukt four funds for investors looking to take a long-term timeframe.
Investec UK Alpha
We start with Investec UK Alpha managed by Simon Brazier, who took over the running of the portfolio from Jonathan Parker in 2015.
Since taking over, the £1.9bn has returned 23.28 per cent, slightly below the IA UK All Companies sector and FTSE All Share index as the below chart shows.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics
“This is a broad-based fund with a moderate quality-bias and a confident manager in Simon Brazier,” Rowan Dartington investment analyst Ben Stoves said.
“Meeting company management is fundamental to his process as he ultimately attributes a company’s success to management’s ability to allocate capital appropriately.
“It should work well as a core UK equity holding that I would expect to outperform over the long term.”
This is not a fund that necessarily aims to shoot the lights out however, but instead looks to outperform regardless of the market backdrop.
Unlike more aggressive strategies found within the IA UK All Companies sector that can be more cyclically sensitive with the manager instead aiming to produce regular levels of outperformance.
The portfolio is currently most highly weighted to financials (22 per cent), industrials (19.8 per cent) and consumer services companies (14.9 per cent).
Investec UK Alpha has a yield of 2.42 per cent and a clean ongoing charges figure (OCF) of 0.83 per cent.
LF Miton Cautious Multi Asset
Square Mile Research’s head of risk-based solutions research Alex Farlow suggested investors could look to the five FE Crown-rated LF Miton Cautious Multi Asset fund run by David Jane and Anthony Rayner.
The £529m fund aims to provide an absolute return of 4-6 per cent per annum whilst exposing investors to a low-to-moderate level of risk.
Overall it targets a level of volatility over the medium term that is around 50 per cent of equity volatility, as measured by the FTSE 100.
Since Jane took over the fund in 2014 (Rayner joined him six months later) the fund has returned 29.53 per cent – beating both the IA Mixed Investment 20-60% Shares sector and the FTSE 100 over the period.
Performance of fund vs sector and benchmark since manager start
Source: FE Analytics
During this time, the portfolio has experienced 5.85 per cent monthly volatility versus the FTSE 100’s 9.91 per cent, though this is slightly higher than the sector average’s 4.97 per cent.
“We like this small but close-knit team who are able to make investment decisions quickly and efficiently and the managers are experienced investors and have worked together for many years,” Farlow said.
“Their approach is dynamic and unconstrained but has a focus on managing risk and preserving capital. We think the combination of the clear and transparent risk and return targets the experience of the managers and the flexible approach make this compelling offering.”
The fund is currently 37.1 per cent invested in corporate bonds while its largest equity weighting is to Europe ex UK stocks.
LF Miton Cautious Multi Asset has a yield of 2.36 per cent and an OCF of 0.84 per cent.
Artemis Monthly Distribution
Next up is the £755m Artemis Monthly Distribution run by highly regarded fund managers, Jacob de Tusch-Lec and James Foster, according to Gavin Haynes managing director at Whitechurch Securities.
“The fund aims to provide a monthly income and long-term capital growth through investment in a blend of corporate bonds and global equities,” he said.
“De Tusch-Lec is responsible for the global equities within the fund and he is also lead manager of the hugely successful Artemis Global Equity Income fund.
“James Foster manages the bond component of the fund and he has built up a strong track record in this area from managing Artemis Strategic Bond.”
The five FE Crown-rated fund has been the best performing fund in the IA Mixed Investment 20-60% Shares sector since its launch in 2012, returning 94.75 per cent – more than double the sector average’s 43.19 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The fund has 34.3 per cent invested in financials – the only sector with a more than double-digit weighting within the 44.8 per cent equities bucket.
It is 36.7 per cent invested in non-investment grade with 14.1 per cent in investment grade bonds and 3.1 in government bonds.
Artemis Monthly Distribution has a yield of 4.12 per cent and an OCF of 0.84 per cent.
Vanguard LifeStrategy 80% Equity
For those taking a truly long-term approach however, Informed Choice managing director Martin Bamford said a passive option may be the way to go.
“For balanced investors prepared to take the long view, I would suggest Vanguard LifeStrategy 80% Equity,” he said.
“This fund offers exposure to a diversified notional portfolio comprised of approximately 80 per cent equities and 20 per cent fixed income, which feels reasonable for a long-term balanced investor.
As an index tracker fund, the five FE Crown-rated, £1.7bn portfolio has very low ongoing charges of 0.22 per cent.
Source: Vanguard
The fund gains its diversification by investing in a range of 14 different Vanguard index tracker funds, across all equity regions and several fixed income asset classes, as the above shows. Vanguard LifeStrategy 80% Equity has a yield of 1.6 per cent.