Mark Dampier: 'It's not rocket science, but that's the beauty of this homespun fund'

Chris Burvill's Henderson Cautious Managed fund employs an approach that's simple enough to explain to your grandmother

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The Independent Online

Life seems to get ever more complicated. Transparency, for example, was intended to improve the lives of consumers and investors alike. In many cases, I feel the effect has been quite the opposite.

Take the energy sector. If it had truly succeeded in ensuring tariffs were sufficiently transparent, there would be no need for comparison sites.

The financial world can seem equally elusive. With investment options including risk-targeted, absolute return, multi-asset and multi-manager portfolios, even funds are not always straightforward.

An oasis in this complicated world is Chris Burvill's Henderson Cautious Managed fund. Mr Burvill employs an approach that's simple enough to explain to your grandmother. He does not invest in fancy derivatives, property, commodities or other funds – he simply buys a blend of UK equities and bonds.

I recently met Mr Burvill for an update, and while many other managers tend to focus on their achievements, he was keen to explain why the fund had underperformed its peer group over the past year.

Henderson Cautious Managed holds around 25 per cent more in UK equities than the average fund in the sector, which is more geographically diversified. As the UK has not achieved the gains some other regions have enjoyed, this has hurt the fund's relative performance.

Its exposure to oil and mining companies has increased recently, which again has not helped. BP and Rio Tinto have had a torrid time, and while BG Group rose strongly after the bid from Royal Dutch Shell, it has since fallen back.

Mr Burvill takes a long-term approach, however, and is prepared to be patient. He feels investors are wrong to believe there is little opportunity in larger companies, and recently increased his exposure to the banking sector, including topping up a position in HSBC. Mr Burvill believes investors have become bored with the stock, but as it currently offers a yield of 5.5 per cent, he views it as an attractive proposition.

The fund also holds Centrica, Tate & Lyle, Tesco and Rolls-Royce; while none of these has benefited the fund's performance recently, he is confident they will in the future. Elsewhere, the fund has had plenty of winners, with investments in BAE Systems, BT Group, Smith & Nephew and Sage all boosting returns over the past three years.

I have regularly remarked in this column how investors often underestimate their home stock market. Perhaps this is no wonder, as much of our reading is focused on issues close to home and much of the media is pessimistic.

But Mr Burvill retains his positive outlook for UK companies, particularly after the surprise election result, and points to the positive impact that five years of political certainty will have on asset prices. An economic recovery on the Continent could also boost the earnings of many UK businesses. That said, while European shares are already discounting better times, a European recovery is yet to be factored into UK share prices.

Elsewhere, around 50 per cent of the fund is invested in bonds and cash, with the latter accounting for 15 per cent of the total portfolio. The high cash weighting should not necessarily be taken as a sign that Mr Burvill is bearish on bonds. His pragmatic use of cash involves increasing the fund's fixed-interest exposure when yields rise (and therefore prices fall) and reducing exposure when yields fall.

The beauty of this fund lies in the manager's straightforward approach – no magic wand but no need for a degree in rocket science either. With £2.2bn under management, many other investors obviously agree. In essence, they are buying into Mr Burvill's ability and experience, along with his desire to grow income and capital while limiting the downside in falling markets.

I end this week's column with an apology. A few years ago I criticised the manager for not investing in other asset classes – yet the fund has performed well regardless. Overall, it has the potential to harness some of the long-term growth potential of shares, but by taking a more cautious approach. I believe it could provide the core to many portfolios.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds in this column, visit www.hl.co.uk

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