Vaccine news gave markets a real boost in November, encouraging optimism across multiple sectors. However, that excitement has waned slightly with parts of the UK going into a ‘tier 4’ lockdown because of a new strain of Covid-19.
When constructing the Balanced portfolio, panellists on the FE fundinfo AFI (Adviser Fund Index) panel are asked to select funds for a person in their mid-40s with a slightly lower risk appetite.
With that in mind, Trustnet asked five fund pickers for the strategies an investor with such a risk profile should consider.
Heptagon Future Trends
First up is Andy Merricks, manager of the EF 8am Focused fund, who has picked the $176.3m Heptagon Future Trends Equity fund.
“Yes, it’s invested in equities only,” he started. “Yes, it’s a little more expensive than some competitors and passive funds. But sometimes you get what you pay for, and this fund seeks out the ‘best of breed’ stocks in a very diversified set of trends.”
Managed by Alex Gunz, the fund is diversified across a broad range of themes including alternative energy, food innovation and healthcare solutions.
“It has a strong ESG [environmental, social & governance] bias without labelling itself as an ESG – or sustainable – fund,” said Merricks.
“Importantly, it has outperformed in market downturns as well as in bull markets which is why I suggest it for a balanced risk investor over some funds in this category that also invest in what I see as quite high-risk bond markets.”
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
Since launch, the offshore Heptagon Future Trends Equity fund has made a total return of 144.45 per cent compared with a 105.35 per cent return for the MSCI World index and a 78.76 per cent gain for the average FO Equity – International peer. It has an ongoing charges figure (OCF) of 1.36 per cent.
Trojan Ethical
Fairview Investing co-founder Ben Yearsley has chosen the £229.1m Trojan Ethical fund, which has been managed by Charlotte Yonge since 2019 as his balanced fund pick.
“It combines equities, inflation linked government bonds and gold with the proportion varying depending on the team outlook,” said Yearsley.
The investment universe at Troy Asset Management focuses on companies that have low capital intensity and cyclicality. Sectors such as consumer goods and health care feature heavily in Troy portfolios, whereas miners and airlines would rarely be investable.
“They only invest in long term quality sustainable companies,” he added. “Obviously being an ethical fund, the obvious sectors are excluded.”
Alex Farlow, head of risk-based solutions research at Square Mile Investment Consulting & Research, also opted for the Trojan Ethical fund, highlighting the investment philosophy that seeks to prioritise the avoidance of permanent capital loss along with growing capital over the long-term.
“The manager believes in the importance of asset allocation and combines this with sensible stock selection,” said Farlow. “She invests predominantly in traditional assets, as well as, at times, gold or gold related investments.
“Investors should be aware that this is an exclusions fund and therefore they need to be comfortable that any investment areas, which are not explicitly excluded, could potentially be held in the fund.”
Performance of fund vs sector & benchmark since launch
Source: FE Analytics
Since it launched in 2019, The Trojan Ethical fund has returned 19.69 per cent compared to 15.93 per cent gain from the average peer in the IA Flexible Investment sector, and 2.98 per cent from the UK Retail Price Index. It has an OCF of 0.77 per cent.
Artemis Global Select
The third pick comes from Adrian Lowcock, head of personal investing at Willis Owen, who has opted for the £265.9m Artemis Global Select fund.
The co-managers of this fund, Alex Illingworth, Rosanna Burcheri and Simon Edelsten, all carry out research and contribute to the portfolio construction.
“Edelsten is the ultimate decision-maker,” said Lowcock. “The team seek companies on attractive valuations that are poised to benefit from recognized long-term secular growth trends.”
He added that when screening companies, the team looks for those that exhibit high and sustainable barriers to entry, sustainable cash flows, a clear capital structure and strong management.
“The portfolio does not pay attention to the benchmark and the managers are careful to avoid unintended risks, so holdings do not usually exceed 3 per cent of the portfolio,” Lowcock added.
“The managers stick to their disciplined approach and are willing to hold cash if they do not find any attractive investments – we admire the insightful strategy of this team.”
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
Over three years, the five FE fundinfo Crown-rated fund has made a total return of 41.19 per cent, against a return of 32.67 per cent for the average fund in the IA Global sector and 31.52 per cent for MSCI ACWI index. It has an OCF of 0.90 per cent.
RIT Capital Partners
Finally, Charles Stanley Direct pensions and investment analyst Rob Morgan has chosen the £3.2bn RIT Capital Partners trust as his balanced fund pick.
“It’s an investment trust with a broad range of assets and a flexible approach,” said Morgan. “The overall aim is to beat inflation while limiting the ups and downs usually associated with investing in the stock market – a goal that resonates with many investors.
“It has an exceptional long-term track record through a differentiated and unconstrained approach.”
He said shares make up the core of the closed-ended strategy – represented by managed funds and some individual stocks – and is supplemented by bonds, absolute return funds, investments in private companies and the ability to add downside protection through derivatives.
“2020 has not been a sparkling year for the trust in comparison with its fine longer-term record,” said Morgan. “But I continue to believe it maintains an edge with its access to specialist managers and private equity deals.”
Performance of fund vs sector over 5yrs
Source: FE Analytics
Over five years, the RIT Capital Partners trust has made a total return of 36.12 per cent, against a return of 32.91 per cent for the average fund in the IT Flexible Investment sector.
The trust is currently trading at a 4.6 per cent discount to net asset value (NAV), is 8 per cent geared, and has ongoing charges of 0.68 per cent, according to the Association of Investment Companies (AIC).