Mark Dampier: Forget forecasts and find good fund managers
Saturday 03 December 2011
I highlighted the Trojan Income fund back in July and I make no apologies for returning to it. Since that date stock markets have been more volatile than I can remember in my 28 years in the investment industry, and the fund has coped admirably. The volatility is driven by macro-economic factors, particularly in the eurozone where politicians are failing to grapple with the current problems and remain a step behind the market. I cannot see this situation lasting much longer. It seems that either the eurozone will break up, at least in part, or that the ECB will come in as the buyer of last resort as has happened with central banks in the UK and US.
With all this going on, trying to forecast the market in any rational way has become harder than ever. In truth, the answer is to not forecast anything at all. Instead, concentrate on having the best fund managers looking after your money and have a decent percentage of your portfolio in cash ready to swoop if events suddenly take a turn for the worse. The trouble is holding cash is fraught with its own difficulties. You pay a high price for security with current rates a long way behind inflation, and as banks are still repairing themselves I do sometimes wonder how safe my cash really is. The first £85,000 in any one institution is guaranteed by the government, but the eurozone crisis is showing us that sovereign debt itself isn't as safe as once thought, turning the notion of risk on its head.
What we do know is that interest rates are not going up any time soon, and rates on cash deposits are likely to remain low. So despite the volatility of the equity market, exposure to good-quality high-yielding shares looks attractive. It is not difficult to envisage many of these top businesses being around and thriving in 10 or 20 years' time. In contrast, looking around the eurozone it is questionable whether some countries will still be part of it.
Trojan Income, managed by Francis Brooke, is full of good-quality, stable companies such as Vodafone, Shell, GlaxoSmithKline, AstraZeneca and Tesco. While these companies can be affected in the short term by macro-economic influences they look strong enough to withstand most problems. As well as larger firms there is exposure to lesser-known companies paying generous dividends such as Greggs, London & Stamford and AG Barr. There are also some robust overseas companies such as Nestlé and Coca Cola. Interestingly, the Trojan managers are positive on the prospects for gold, and the fund contains Newmont Mining and Newcrest Mining, two of the world's leading gold producers.
The fund is part of Troy Asset Management, which was set up in 2000 with a simple "total return" approach in mind. Their philosophy is that if you minimise losses during downturns, you don't have to regain as much when markets recover, so Troy funds all have a capital preservation mentality at their heart. Given its aim of producing a high level of income, this fund tends to stay more fully invested than the Troy Trojan fund, which I have previously written about. Even so, Francis Brooke often lets cash build up to significant levels if he believes valuations will become more attractive – an unusual tactic in this sector. Presently, cash accounts for 7 per cent of the portfolio, though it has been well into double figures at times. This attention to deploying cash at the right moments has helped generate the fund's excellent performance, as well as make it the least volatile in its sector since its launch in 2004.
Trojan Income has just the sort of portfolio that should be relatively resilient in an uncertain economic climate, and with a present yield of more than 4 per cent and an unbroken record of growing income payments since launch it is not a bad place to look for income. Hopefully, further dividend increases lie ahead for 2013. The fund should therefore appeal to a wide range of income-seeking investors, as well as those with a more cautious outlook looking to remain invested in the stock market through good-quality, dividend-paying companies.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent
- 1 This restaurant has misunderstood the concept of 'cheese and biscuits'
- 2 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 The 'sex selfie stick' lets you FaceTime the inside of a vagina
New theory could prove how life began and disprove God
End of the licence fee: BBC to back radical overhaul of how it is funded
This is what it's like to be dead, according to a guy who died for a bit
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...
£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads