Jane, whose cautious multi-asset fund recently attained a three-year track record, says that investors generally understand cautious in terms of how much they could lose if things go wrong. He believes this definition means more to them than discussions about risk profiles and how much the IMA allows cautious funds to hold in equities or fixed interest.
Cautious funds are commonly defined by sector rules about portfolio construction, according to Jane, but he thinks all investors want from cautious funds are returns above inflation and cash, enabling them to participate in rising markets without losing money in falling markets.
Jane says: “The cautious multi-asset fund did exceptionally well in the bear market, so people were assuming it would not do so well in a bull market, but we have done precisely what we promised to do. At the start, we said we would manage the fund according to the client’s perception of risk, not the regulator’s. Outcome based investment is what people care about when they go to an IFA.”