Mark Dampier: Why try to reinvent investing? Stick to the old-fashioned way
Friday 16 May 2014
Once every few years the investment industry tries to invent a new product. At present multi-asset investments are very much in vogue. It sounds exciting, except in the main it is simply the new buzz word for what we used to call a managed fund.
Multi-asset investments blend more than one asset class into a single fund. As well as shares fund managers might also hold bonds, property, cash and currencies. Some even use alternative investment techniques and derivatives with the aim of benefitting from falling asset prices or changes in other variables like interest rates.
In the main it is just a regurgitation of the old (but correct) maxim that you should not put all your eggs in one basket.
One of the problems with this "new" way of investing is it gives you every chance of losing as much as you might make. Many investors think asset allocation needs to be changed all the time, but I just don't believe this is true.
One fund I would highlight as evidence of this is AXA Framlington Managed Balanced. Richard Peirson, the fund's manager, has achieved great success over the past 20 years.
He has added value for investors slowly and incrementally, only ever making small changes to the fund's asset allocation. Mr Peirson's strategy, as far as asset allocation is concerned, is simply to take profits from areas that have done well and add to those that have lagged.
It is not exactly rocket science, but as can be seen from the performance chart it has certainly been effective. When compared with most insurance company managed fundsit has comfortably outperformed.
Between 75 per cent and 80 per cent of the portfolio tends to be invested in shares, with the remainder in cash and government bonds. Presently around 14.5 per cent of the fund is held in cash, with 9.5 per cent in government bonds.
The government bond exposure is skewed towards gilts – bonds issued by the UK government. Over the past year gilts have generally delivered lacklustre returns as an improving economic outlook has led many investors to favour higher risk assets such as equities. However, along with cash this part of the portfolio is designed to provide some balance to the equity holdings, helping to reduce volatility and offering some relative protection if share prices fall.
Mr Peirson then aims to add as much value as possible through his equity holdings while maintaining a portfolio that is diversified across different countries, sectors and companies of various sizes.
He is responsible for the UK portion of the fund which accounts for around 40 per cent. This part of the portfolio delivered strong returns in 2013 helped by exposure to medium-sized companies and businesses with a bias to the UK economy, finally growing at a stronger pace. House builders such as Barrett Developments and Persimmon benefited from an improving housing market, while BT and ITV had rising customer numbers and robust advertising revenue respectively. After such a strong performance Mr Peirson has taken some profits and increased exposure to UK-listed companies which derive a greater proportion of earnings internationally, including Rolls Royce and Royal Dutch Shell. Given sterling's strength this is probably a good time to start doing this.
The overseas portion of the portfolio gets input from AXA Framlington's experienced global team. Stephen Kelly picks the US stocks, Mark Hargreaves is the European stock picker, and Chisako Hardy provides expertise in Japan. Around 13 per cent is invested in the US with approximately 12 per cent in Europe, 4 per cent in Japan and 6 per cent in Asia and emerging markets.
Mr Peirson recently topped up his exposure to emerging markets slightly, following a couple of disappointing years when compared with developed counterparts.
This fund does not have the sexy "multi-asset" label. It's about good old-fashioned investing and common sense. Mr Peirson's fund has stood the test of time and you soon begin to appreciate that we don't need new products, especially when they are an inferior remake of those already in existence. If only the industry stopped trying to turn lead into gold.
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.hl.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 Israel's propaganda machine is finally starting to misfire
- 5 'Hello mum, this is going to be hard for you to read ...'
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
Day In a Page
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
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000