Sector focus: Is Mixed Investments the way forward?

While the past 12 months have been difficult for investors, many calls have paid off

The Mixed Investment sectors have been hugely popular in recent years. The rise in popularity of multi-asset funds has been phenomenal. As investors seek simpler choices and more transparency with their funds, multi-asset has become an easy route into investing, and gaining market volatility protection through diversifying for a low cost.

Multi-asset funds offer a way to help investors cover a variety of objectives, including risk, total return and income, as well as a mixture of assets, from equities and fixed income to commodities and property.

In a troublesome year for investors, the space managed to achieve strong retail sales, as well as a solid performance.

According to the Investment Association, Mixed Asset was the best-selling asset class in 2018, with £7.9bn in net retail sales, and the Mixed Investment 20-60 per cent Shares space was the fourth best-selling sector of the year, with net retail sales of £1.5bn. Having been renamed from Cautious Managed in 2011, the sector has gone from strength to strength.

As of December 2018, it remained the largest Mixed Investment sector, with £49.4bn in funds under management. It was the second best-selling sector behind its 40-85 per cent Shares counterpart, with net retail sales of £231m in the month. It also remains popular with Isa investors, IA data shows. It is the fourth best-selling sector across five platforms for Isas (Aegon, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact).

The past year has seen positive flows into the sector for 11 out of 12 months, with November witnessing £167m in outflows following market turbulence towards the
end of October.

The IA states that funds in the sector are required to have a range of different investments, as its name suggests.

Funds must have between 20 per cent and 60 per cent invested in equities, and at least 30 per cent must be in fixed income or cash investments.

A minimum 60 per cent investment must be in established market currencies (for example, the US dollar, sterling and the euro).

OMGI’s Anthony Gillham on the hunt for ‘true diversification’

The sector has a total of 155 constituent funds from 77 fund providers, and on average funds have 29.2 per cent allocated to the UK.

Out of 151 funds with at least one-year performance data, 47 failed to return above 0 per cent, although all funds had positive returns over three years.

Looking over one, three and five years, the £629m Pimco GIS Global Multi-Asset fund is the top performer.

Managed by Mihir Worah, the fund has seen a decline in flows, despite its performance. Since March 2016, the fund has witnessed a 44 per cent drop in size in dollar terms.

The Sarasin IE GlobalSar – Strategic fund has been a high performer over the past year, seeing 6.5 per cent returns.

Over a longer investment time horizon, there are 73 funds in the sector that have been running for more than 10 years.

The £186m Premier Liberation V fund is by far the best performer, seeing returns of 179 per cent, meaning an investor who put £100 in the fund 10 years ago would now have £279. A fund of funds multi-asset fund, it invests indirectly in different assets, including equities, bonds, property and alternatives.

Premier’s £1.5bn Multi-Asset Distribution fund is the second-best performer over a 10-year period, seeing returns of 167 per cent. The funds are both managed by the group’s multi-asset team, headed up by David Hambidge, who has worked at Premier since 1987.

The largest fund in the sector is the £3.7bn LF Ruffer Total Return, managed by David Ballance and Steve Russell. As of the end of January, it currently has 52 equity holdings (its largest is Tesco at 1.9 per cent), and 22 bond holdings (3.7 per cent of the fund is in the UK Treasury index-linked 1.25 per cent 2055 bond).

A closer look at the top performers over five years can be found below.

Mixed Investment 20-60% Shares: Funds in focus

Maximising returns through mixing assets
The sector has seen high inflows and good performance in recent years. Here is a selection of the top five performers over the past five years.

Pimco GIS Global Multi-Asset

  • Performance over 5 years: 64.45%
  • Fund size: £629m
  • Managers: Mihir Worah and Geraldine Sundstrom
  • Launch date: April 2009
  • Benchmark: 60 per cent against MSCI All Country World Index, 40 per cent against Bloomberg Barclays Global Aggregate
  • Breakdown:
    Global Fixed Interest 38%
    North American Equities 37%
    Equities 19%
    Global Emerging Market Equities 6%
  • About: This fund is the top performer over one, three and five years. Its goal is to maximise return, consistent with preservation of capital. Its managers use both top-down and bottom-up investment ideas across asset classes, regions and sectors. The managers call it an “all-in-one” strategy to serve as a core investor portfolio. The fund heavily invests in fixed interest and US equities.

Sarasin IE GlobalSar Strategic

  • Performance over 5 years: 51.96%
  • Fund size: £35.1m
  • Manager: Guy Monson
  • Launch date: April 2015
  • Benchmark: Composite, including 50 per cent BofA ML Sterling Broad Market Index
  • Breakdown:
    Global Fixed Interest 47.2%
    Equities 38%
    Money Market 7.3%
    Alternative Investment Strategies 5.7%
    Property 1.7%
  • About: This Ireland-domiciled fund has seen performance go from strength to strength. It aims to achieve a return ahead of inflation through investing in equities and fixed income. Its highest country allocation is to North America (41.5 per cent), then Europe ex-UK (23.1 per cent). Its highest holding as at the end of January is Lloyds Banking Group, amounting to 1.4 per cent of the portfolio, followed by 1.3 per cent in California-based biopharmaceutical group Amgen and 1.3 per cent in sports brand Nike.

Royal London Sustainable Diversified Trust

  • Performance over 5 years: 47.07%
  • Fund size: £671.4m
  • Manager: Mike Fox
  • Launch date: November 2012
  • Benchmark: None specified
  • Breakdown:
    UK Fixed Interest 39.67%
    UK Equities 31.07%
    North American Equities 16.72%
    European Equities 11.73%
    Money Market 0.81%
  • About: Investing in high-quality shares is what this fund prides itself on. Using sustainable investing, it has a negative screen which excludes companies that manufacture armaments, tobacco, generate nuclear power, or have “unacceptable” corporate governance. It also normally avoids firms that derive a material proportion (typically 10 per cent) of business from military applications, animal fur products, pornography or gambling.

Axa Global Distribution

  • Performance over 5 years: 46.58%
  • Fund size: £238.4m
  • Managers: Matthew Huddart and Jamie Forbes-Wilson
  • Launch date: September 1999
  • Benchmark: 55 per cent against MSCI AC World, 45 per cent against BofA ML Global Government Inflation Linked
  • Breakdown:
    International Equities 52.4%
    Global Fixed Interest 29.17%
    UK Index-Linked 13.39%
    UK Equities 3.4%
    Money Market 1.64%
  • About: Looking to achieve a growing income with prospects for capital over the medium to long term is what this fund aims to do.  It invests heavily in equities (the highest equity holding is household name Amazon at 1.3 per cent). The rest of its top 10 holdings are all US Treasury bonds or HM Treasury gilts. Of its fixed income holdings, 63.3 per cent are in AA-rated bonds.

Artemis Monthly Distribution

  • Performance over 5 years: 43.02%
  • Fund size: £965.3m
  • Managers: Jacob de Tusch-Lec and James Foster
  • Launch date: May 2012
  • Benchmark: 60 per cent against Markit iBoxx GBP Non-Gilts, 40 per cent against MSCI ACWI
  • Breakdown:
    Global Fixed Interest 36.81%
    European Equities 29.17%
    North American Equities 18.58%
    UK Fixed Interest 12.0%
  • UK Gilts 3.81%
  • About: This fund invests heavily in financials. However, it also has a large focus on energy and utilities. Its largest holding comes from Z Energy (1.7 per cent), a New Zealand fuel distributor. While it has holdings in well-known companies such as General Motors, it also allocates to lesser-known firms like Nobina, the largest bus transport group in the Nordic region. It aims to achieve an income, in addition to capital growth, through managing global equities and bonds actively.


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