Rugby World Cup: A first XV of collective funds
Despite the disappointment of having none of the Home Nations left in the tournament, we hope UK investors can seek some solace in these fund picks. However this is not intended to constitute personal financial advice and should not be construed as such.
Starting with the front five on the pitch: these positions are not necessarily the most agile, or the fastest. However they have vast strength and fitness that allows them to keep ‘plodding on’ throughout the match in all conditions. The front five are all about creating a stable platform for the faster, more creative players to build upon.
Prop – Kames Investment Grade Bond: A bond fund designed to maximise total return through investing in investment grade and government bonds. Managed by Stephen Snowden and Euan McNeil, this £992m fund rarely exceeds allocation of 20% to high yield bonds with any non-sterling exposure typically hedged back to sterling. While first quartile in its peer group over over and three years, this fund has a volatility below the IA Sterling Corporate Bond sector average.
Hooker – Artemis Strategic Bond: Another bond fund. C0-managed by James Foster and Alex Ralph, this £836m fund aims to provide excellent risk-adjusted returns, though does not have a specific yield target. It does this by focusing on UK gilts and European credit with a high-conviction approach and over one and three-years the fund is second quartile in the IA Strategic Bond sector.
Prop – Fidelity Moneybuilder: A multi-asset fund that invests in both shares and bonds. The fund managers achieve an attractive level of income together with some long-term capital growth from a portfolio invested primarily in the UK. Again, this is defensively positioned with a strong focus on capital preservation.
Second rows provide support to the front three. Frequently some of the biggest players on the pitch, they provide weight but again are not always the sprightliest players and can sometimes lag when games change direction.
Second row – Invesco Perpetual High Income: This £12bn fund has historically proven resilient in falling markets with a defensive investment style, though this has been at the expense of lagging performance when markets rise strongly.Formerly managed by Neil Woodford and now run by Mark Barnett, it targets a high level of growth with a focus on UK equities.
Second row – Premier Optimum Income: This is a fund for the income seekers, with a historic yield of 6.83% paid quarterly. Managed by Chris Wright, it does also aim to grow capital as a long-term goal, but as the name suggests its primary objective is optimising income.
Moving to the back row, the workhorses on the field. These are the players who are always seeking the ball to gain an advantage – think Australia’s David Pocock here – and with the final weight coming from the number 8, locking the whole scrum together and pushing them forward.
Blindside Flanker – Somerset Emerging Markets Dividend Growth: This a fund that invests in companies listed in emerging markets around the world. Fund manager Edward Lam aims to achieve growth in capital and income by investing in dividend-paying stocks. As an investment house, Somerset specialises in running emerging market funds and this £930m offering sits first quartile in the IA Global Emerging Markets sector over one and three years.
Openside Flanker – Artemis UK Growth: Artemis UK Growth is a mainstream UK equity fund that aims to provide long-term capital growth. The fund tends to focus on large and medium-sized companies. Fund manager Tim Steer uses an in-house screening tool to aid stock selection. The fund can take short positions, whereby the managers seek to profit from falling share prices.
Number 8 – iShares Core S&P 500: A passive ETF currently at $64bn. This passive fund is built up of the 500 largest US companies.
Moving to the backs; these players are faster and more agile, with their performance often responding quicker to game or market movements. They take a thematic approach to the game but, in trying to pass the gain line, make bold decisions that don’t always pay off.
Scrum Half – Marlborough UK Micro Cap Growth: As often found in the top tier RWC sides, scrum halves like Argentina’s Martin Landajo are small, agile, and resilient while retaining an air of unpredictability. This fund, managed by Giles Hargreave, is one of the top performing UK small cap funds. It invests in companies between £100-250m market cap, and to allow for flexibility in an often illiquid market holds a large number of holdings in the portfolio. It has shown strong performance in varied market conditions and could be suitable for those seeking higher risk/reward in their portfolio.
Fly Half – Jupiter European: Fly-halves need to be able to see the whole game, constantly looking several phases ahead of the current situation. Alexander Darwell, who manages this fund, eschews short-term movements, focusing on building positions in companies with sustainable growth. This tactic allows the fund to hold 30 -40 equities that are indifferent to macro-economic cycles.
The midfield on a rugby pitch have to provide an element of defence and the ability to make yards, best demonstrated by New Zealand’s ‘Sonny Bill’ Williams. For this reason we have illustrated the centre’s with funds that exemplify these traits:
Inside Centre – Henderson UK Property: A commercial property fund consisting of over 120 properties with a 60% bias towards the south-east. It has circa 15% in cash allowing the fund to act quickly on finding a good opportunity.
Outside Centre – Rathbone Global Opportunities: This fund aims to provide above-average long-term capital growth from a portfolio of global companies. Fund manager James Thomson utilises Rathbone’s thematic investment approach driving high conviction ideas within the fund. The fund tends to focus on large and medium-sized companies but is not constrained by company size, sector or geographic location.
The back three
With regard to the back three, a good rugby team fills these positions with individuals who are always seeking to cross the line and take opportunities to do so. As players, they are often lightning fast but not always the securest in hand. Due to their exposed positions on the field, when mistakes are made they can be very costly when things go wrong.
Right Wing – AXA Framlington Biotech: This fund, managed by Linden Thomson, invests in a highly specialised sector. While it invests on a global basis, the bulk of portfolio (88% at the end of September) consists of US stocks, reflecting that is the hub of the industry.
Left Wing – Neptune Japan Opportunities: This fund, managed by Chris Taylor, employs a variety of investment techniques including shorting, currency hedging, and high cash weighting to outperform the market. These tactics have proven very successful during the financial crisis of 2008 but at other times it has underperformed the market.
Full Back – Threadneedle UK Absolute Alpha: This small fund, co-managed by Chris Kinder and Mark Westwood, can act quickly on positions. It has produced an impressive performance to date while eliciting relatively low levels of volatility.
These funds may not be suitable for everyone and you should always seek advice from a professional adviser if you are unsure about investing. The old adage of ‘past performance is not a guide to future returns’ is always appropriate, much like the England Rugby team in this Rugby World Cup.”
Harry Webster is a development manager at Strawberry Invest