Odey Odyssey, TwentyFour Asset Backed Income, Fidelity Global Inflation Linked Bond and R&M World Recovery are among some of the funds that could help protect investors from the challenges ahead, according to Psigma Investment Management’s Tom Becket.
In the context of global growth, rising interest rates and higher inflation expectations, the chief investment officer highlights some themes and funds that could be combined into a portfolio and benefit over the next years.
Becket has included funds that provide inflation protection, global equity funds that can provide long-term equity growth, others that can benefit from emerging market growth, defensive funds and some that can provide a decent income.
Becket’s first fund pick is offshore multi-asset strategy Odey Odyssey, which has been overseen by Tim Bond since 2011. Bond builds the portfolio according to his assessment of the economic outlook investing across a range of asset classes.
According to Becket, this fund is important because it provides a negative correlation to the current correlation we are seeing in bonds and equity markets.
“Odey Odyssey has had a difficult couple of years but came back into form in the first quarter”, said Becket. “It is a good fund to hold as it’s solid, strong and defensive.”
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
Despite delivering a gross return of 3.21 per cent during 2018, so far, the fund has struggled in recent years. Over 10 years the fund has delivered a gross return of just 7.21 per cent, compared with a 38.88 per cent for the average FO Mixed Asset Flexible sector fund.
For those hunting for yield Becket has selected NB Short Duration Emerging Market Bond, TwentyFour Asset Backed Income and TwentyFour Focus Bond.
“Neuberger Berman Short Duration Emerging Market Bond is solid and dependable and should continue to provide a predictable return on the uncertain markets ahead,” noted Becket.
The $3.6bn NB Short Duration Emerging Market Bond is overseen by Bart van der Made, Jennifer Gorgoll and Nish Popat. Another offshore fund, which invests in short duration, emerging market sovereign and corporate debt denominated in ‘hard’ developed market currencies.
Performance of fund vs sector since launch
Source: FE Analytics
Over five years, the fund has delivered a 35.59 per cent total return compared with a 24.62 per cent gain for the average fund in the FO Fixed Interest Emerging Markets sector. It has an OCF of 1.16 per cent.
TwentyFour Asset Backed Income, overseen by Aza Teeuwen, Ben Hayward, Rob Ford and Douglas Charleston is another fund the chief investment officer highlights for those in the hunt for yield.
“The fund operates in European asset-backed securities and it is still achieving a decent return and healthy yield alongside a very specialist mandate in short duration global credit,” Becket said.
Since launch, the £101.6m fund has delivered a 67.12 per cent compared with a 30.34 per cent gain for the IA Specialist sector and has an OCF of 0.67 per cent.
Another fund Becket likes is the five FE Crown-rated TwentyFour Focus Bond, as it should provide “a decent income and be solid and dependable”. The £1116.8m fund is also team managed and aims to deliver an attractive level of income with the opportunity for capital growth.
For those worried about rising inflation, Becket has chosen two investments that he believes can help protect portfolios against rising inflationary trends over the next few years: Fidelity Global Inflation Linked Bond and Lazard Commodity.
“Fidelity Global Inflation Linked Bond is a good play on short duration, inflation breakeven, which I think can be very useful,” noted Becket.
The $1.4bn fund has been overseen by Timothy Foster alongside FE Alpha Manager Ian Fishwick since 2016 and aims to provide income and capital appreciation. It has at least 70 per cent invested in inflation-linked bonds, nominal bonds and other securities from issuers worldwide across developed and emerging markets.
Under Foster and Fishwick the fund has delivered a 0.97 per cent total return compared with a 1.45 per cent gain for the IA Global Bonds sector.
Lazard Commodity is overseen by Terence Brennan, Michael Bernadiner, Eduardo Gonzalez and Caroline Abramo. Becket noted the fund is a good opportunity to try to make money from increasingly positive commodity markets and good supply and demand fundamentals in the commodity space in the next few years.
Next among the themes to consider for the next few years is the equity growth theme, a reason why Becket has selected three global equity funds.
The £4.2bn Artemis Global Income is the first on Becket’s list and has been overseen by Jacob de Tusch-Lec since 2010.
According to the FE Invest team, that has included the fund on its FE Approved list, de Tusch-Lec studies financial statements to identify businesses that still have plenty of cash left after they have covered all their expenses, increasing their ability to pay a portion of their profits to shareholders as dividends
“The fund provides a decent yield and a current play in the financial sector, which we think is excellent,” said Becket.
Over five years, Artemis Global Income has delivered an 86.90 per cent total return compared with a 54.98 per cent gain for the average fund in the Global Equity Income sector and a gain of 83.63 per cent for the MSCI AC World index. It has a yield of 3.41 per cent.
Another fund within the equity growth theme is the £462.7m R&M World Recovery, managed by Hugh Sergeant since 2013.
The five FE Crown-rated fund consists of international equities that Sergeant believes will benefit from a recovery in company profitability over the medium and longer term and is not restricted by reference to a benchmark, territory, sector constraints or company size.
“Despite is value tilt it has had a sensational last five years and I believe is well positioned to benefit from the return to value investing in global financial markets over the next few years,” said Becket.
Over five years, R&M World Recovery has delivered a 101.51 per cent total return compared with a 71.11 per cent gain for the IA Global sector and a gain of 83.63 per cent for the MSCI AC World index. It has OCF of 1.17 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Finally, the $314.2 Macquarie Asian All Stars – managed by John Bugg, Sam Le Cornu and Duke Lo – is a fund Becket likes as it can benefit from emerging markets growth.
He added: “This fund is a play in Chinese outbound tourism and the rising wealth for the Chinese middle class in Asia, a great long-term play.”