Best mixed-asset funds: Fund Awards 2016

mixed-asset-fund-award

BEST HIGHER-RISK MIXED ASSET FUND

Newton Multi-Asset Growth

1-year return: 4%; 3-year return: 33%

For the winner of our higher-risk mixed asset award we looked to funds in the Investment Association's (IA's) mixed investment 40-85 per cent shares and flexible investment sectors.

They are considered higher risk because of their potentially higher exposure to shares. However, for Christopher Metcalfe, manager of the winning Newton Multi-Asset Growth fund since 2011, being in the flexible sector means 'we can go wherever we think we can make money'.

Over the past three years, the fund has been almost wholly invested in equities, where Metcalfe has found the best opportunities.

However, he points out that some holdings labelled as equities have bond-like characteristics, such as utilities and infrastructure companies, which are more defensive and less correlated to stock markets than ordinary company shares.

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Methodology

Similarly, the fund has had exposure to property through its holding in Workspace, a company that owns industrial estates and offices around London.

Metcalfe explains that the fund takes a global approach: he looks for the best companies in the best sectors. The portfolio is relatively concentrated into around 50 holdings.

'Newton's investment philosophy is based on finding longer-term themes. This helps us to avoid being blown off course by short-term market movements, of which there have been plenty in the last three years,' he says. 'There is also a lot of analysis at a company level.'

These themes can also steer managers away from certain areas. As a result of a debt burden theme, for example, Metcalfe has stayed away from China and other emerging markets over the past three years.

His main focus has been on the US, Europe and the UK. He says: 'Growth will remain lacklustre and interest rates will stay low, so we have focused on companies with low capital intensity and high free cash flows.'

HIGHLY COMMENDED HIGHER RISK MIXED ASSET FUND

Royal London Sustainable World

1-year return: 0%; 3-year return: 32%

A familiar name in these ranks, Royal London Sustainable World won Money Observer's Best Mixed Asset (Higher Risk) Fund award in 2015 and our Best Mixed Ethical/SRI Fund award in 2014 and 2015.

This year it is highly commended in the higher-risk mixed asset category.

newton-multi-asset-growth-versus-royal-london-sustainable-worldThe fund was previously called CIS Sustainable World, but since Royal London took over the CIS funds in 2013 they have gradually been rebranded.

This has not affected the management of this fund as it remains under the stewardship of Mike Fox, its manager since inception in 2009.

Fox favours innovative companies that aim to have a positive impact on society. He also likes to invest in companies showing leadership in environmental, social and governance management.

The fund sits in the IA's mixed investment 40-85 per cent share sector.

BEST LOWER RISK MIXED ASSET FUND

Premier Multi-Asset Distribution

1-year return: 0%; 3-year return: 24%

Taking the prize in this category is Premier Multi-Asset Distribution, which sits in the IA's 20-60 per cent share sector and has been managed by David Hambidge since inception in 1995.

This fund of funds was highly commended in 2015, but has gone one step better this year, pipping Artemis Monthly Distribution by a slim margin.

artemis-monthly-distribution-versus-premier-multi-asset-distributionBoth the Premier and the Artemis fund were neck and neck in terms of risk-adjusted performance over the three-year period to the end of March.

The funds returned 24 per cent and 27 per cent respectively, but Premier Multi-Asset Distribution's slightly higher yield separated the two.

Hambidge and his team pick what they perceive to be the best fund managers in various different asset classes. Diversification is key to the process, with the portfolio containing 55 funds.

As well as reducing risk, the spread of holdings helps the fund pay dividends quarterly. Currently it has 30 per cent in UK funds, with Schroder Income and Rathbone Income the top two holdings.

Just under a fifth (18 per cent) of the portfolio is held in international equities, while the remainder is split between bond funds (33 per cent), property funds (10 per cent), alternatives (6 per cent) and cash (3 per cent).

Hambidge likes fund managers to have 'skin in the game', and also keeps a close eye on fund size. He also looks for managers who share his views on yield. He typically buys funds for Premier Multi-Asset Distribution that have a progressive dividend policy, rather than focusing on total return.

Hambidge and his team manage several other multi-asset funds, including Premier Multi-Asset Monthly Income.

According to Hambidge, the main difference between the two is that Multi-Asset Distribution has the explicit aim of growing its income and a slightly higher exposure to equities.

HIGHLY COMMENDED LOWER RISK MIXED ASSET FUND

Artemis Monthly Distribution

1-year return: 1%; 3-year return: 27%

With less than four years under its belt when we carried out our analysis, Artemis Monthly Distribution has reached highly commended status in our awards at its first opportunity.

It had a headstart, however, given the pedigree of its two highly rated managers - James Foster, who manages the bond portfolio, and Jacob de Tusch-Lec, responsible for the equity portion.

The fund is invested globally and the split between bonds and equities is 60/40. The primary aim of the fund is to distribute a monthly income and its target yield is 4 per cent. However, the managers hope that the equity portion will also generate an element of long-term capital growth.

The managers decide whether to invest in shares or bonds depending on which will generate the most income and whether they can deliver at different stages of the economic cycle.

BEST ETHICAL MIXED ASSET FUND

Royal London Sustainable World

1-year return: 0%; 3-year return: 32%

For the third consecutive year Royal London Sustainable World has picked up our best ethical/SRI mixed fund award

It is also highly commended in our mixed-asset higher-risk category. It has won other awards in the past, under the banner of CIS Sustainable World.

royal-london-sustainable-world-performanceThe fund's objective is to achieve capital growth by investing globally in companies that have a net positive benefit for society, through either the products and services they offer or the way they conduct business.

After filtering out businesses that don't qualify, manager Mike Fox says he is left with an investment universe of around 250 companies globally.

Fox notes the idea is to 'invest in growing, innovative companies providing solutions to key social issues'. Although the fund can invest worldwide, it has a bias towards the US and other developed markets.

He highlights Microsoft, Starbucks and Alphabet as three shares that he is backing to be winners over the long term.

'We remain of the view that those companies that can grow faster than the broader economy, by creating new markets and disrupting existing ones through innovation, are attractive investments,' says Fox.

The fund sits in the IA's mixed investment 40-85 per cent share sector and is currently weighted 80 per cent to equities, 5 per cent cash.


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