Multi managers: the funds we’d like to see in our stocking
John Husselbee, head of multi asset, Liontrust
Stewart Investors Global Emerging Markets Leaders fund
As we are entering the next stage of the interest rate cycle, I would not be looking to add government bond holdings to my Christmas list. With starting yields historically so low, and the prospect of rising inflation, negative real returns really do not appeal.
My preference is to look for value; those asset classes, regions or countries which have lagged the broader financial markets in recent times. And you need look no further than Global Emerging Markets, where sentiment has been hit hard by a strong dollar, and China has seen falling commodity prices and a growth scare.
However, in this season of goodwill, there is an argument that much of this bad news is already priced into markets. I would not expect a rapid turnaround as many challenges still exist but believe that patience will be rewarded long term. So digging deep into my Christmas stocking I would like to be unwrapping an investment in Stewart Investors Global Emerging Markets Leaders fund.
Despite recent announcements at the wider company, and pending fund manager changes, the investment philosophy and approach of this fund remains unchanged. It has a team approach of managing a process which looks to capture the upside in rising markets, but also one that has provided its investors with good long term gains by protecting capital in down markets.
Nick Peters, portfolio manager, Fidelity Solutions (Fidelity International’s multi asset team)
Invesco Perpetual’s European Equity Income fund
Invesco Perpetual’s European Equity Income fund would be my hoped for fund in a Christmas stocking. European equities should do well in the year ahead, as the region continues to benefit from supportive monetary policy and weak inflation. The fund itself focuses on companies that are attractively valued and have reasonable earnings visibility –either due to the industry they operate in or their business model. This helps it sustain an attractive yield of 3.16%, while still aiming to achieve capital growth over the long term.
Markets are likely to be more discriminating in 2016, with a narrower range of stocks propelling indices up. In this context, active managers who can identify real winners can help investors benefit most from the ongoing European recovery. We’re also likely to see greater volatility in the year ahead, so the strong risk-adjusted performance of this fund is particularly relevant. The fund is better able to protect capital in difficult market conditions than many of its peers, and the experience of the Portfolio Manager, Stephanie Butcher, is yet another positive.
Ian Aylward, head of multi-manager research, Aviva Investors
Marshall Wace Developed Europe TOPS
With the start of US rate rises seemingly just days away, we are wary of bond duration. After some years of strong equity market returns we are increasingly selective of the regions we are overweight. Earnings growth forecasts are falling and several parts of the credit market are seeing spreads moving up.
Against this background, we are adding to our alternatives exposure. One of our preferred absolute return UCITS is Marshall Wace Developed Europe TOPS. We expect continuing steady returns from this fund with little correlation to markets and low volatility.
The fund invests in pan European equities both long and short in close to equal proportions at all times. It harnesses the best ideas of the sell side broking component in a highly rigorous and systematic manner. This is done through the application of various algorithms to the trade ideas submitted by the brokers on the secure TOPS Web portal. The approach is constantly evolving with enhancements to make the improve the engine. The business is in great financial shape and past performance, in addition to increasing levels of stock dispersion, augers well for returns in 2016.
Lucy Walker, CFA, fund manager, fund of funds, Sarasin & Partners
Vulcan Value Equity
We would like to see Vulcan Value Equity in our stocking. It is the largest equity position across the Sarasin Global Fund of Funds, primarily because it has underperformed the S&P 500 by more than 10% year-to-date, giving us the opportunity to add to our positions.
Vulcan is very long-term in nature, focusing on buying quality businesses at deep discounts. Recent volatility allowed them to buy larger stakes in more discounted businesses, and their recent quarterly letter stated “our performance in the quarter would have been better if we had not done so. Our prospects over the next five years would be worse if we had not done so”. This is exactly the sort of rhetoric we want to hear from our managers – a focus on the long-term, taking advantage of volatility to increase the quality of the portfolio.