Mark Dampier: Why try to reinvent investing? Stick to the old-fashioned way

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

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

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate