Mark Dampier: Forget forecasts and find good fund managers

The Analyst

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

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Sport
Dave Mackay lifts the FA Cup in 1967 having skippered Spurs to victory
football
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
Jihadi John
newsMonikers like 'Jihadi John' make the grim sound glamorous
Arts and Entertainment
As depicted in Disney's Robin Hood, King John was cowardly, cruel, avaricious and incompetent
film
Life and Style
Travis Kalanick, the co-founder of Uber, is now worth $5.3bn
tech
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn