M&G has added a fourth fund of funds to the multi-manager range it has established with Cazenove.
The M&G Cazenove cautious managed portfolio aims to provide both income and capital growth. It invests 50 per cent in bonds and 50 per cent equities via a portfolio of between 12 and 17 funds. Examples of holdings include M&G gilt & fixed interest income, Cazenove UK growth & income and Framlington UK growth.
This fund of funds is lower-risk compared with the existing M&G Cazenove funds of funds, since it has less exposure to equities and a higher bond content. However, Phil Wagstaff, M&G's managing director, UK retail, says investing too much in bond funds would not fit well with the fund of funds concept. He says investing more than 60 per cent in bonds would not achieve sufficient diversification and would make the fund little different to a normal bond fund.
When selecting funds for the portfolio, the multi-manager team will electronically screen funds based on performance data. The managers of the most consistent performers are sent detailed questionnaires and are interviewed by the Cazenove team. Individual funds are then chosen for the portfolio on the basis of these interviews.
Many product providers are offering multi-manager funds that offer opportunities to diversify, using similar performance-based screening processes. However, picking the best performing funds at any given time is not enough, since the multi-management team will need to ensure their mix of funds is appropriate for the cautious risk profile of the fund and this is where the skill will be needed.
According to Standard & Poor's, the Cazenove balanced portfolio fund is ranked 63 out of 76 funds based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to March 3, 2003.