Choosing a unit trust with international expertise protects your long-term investment against risk, writes Tony Lyons

Fund management groups are hoping to score a "double whammy" with customers this year, boosting their traditional end-of-tax-year marketing campaigns by talking up the political risk of the general election. But it would be a mistake to see such marketing ploys as an invitation to invest in managed funds, particularly through PEPs, for short-term profit.

Investment in equities is generally about long-time savings, trying to maximise gains over five, 10 or more years. And despite what the salesmen say, the truth is that changes of government in the UK have historically had little long-term effect on stock market performance. The real issue for investors is not the end of the tax year, or the election, but to develop a strategy for long-term growth.

Few of us have the time, money or ability to assemble a portfolio of shares and other investments to provide good long-term growth prospects with a low risk. But this can readily be accomplished by investing in managed funds such as unit trusts. Many heavily advertised products concentrate on UK investments, particularly the tracker funds that follow the performance of the London stock market. But many City fund managers who look after big pension funds will tell you that the ideal portfolio is internationally diverse, to benefit from overseas gains. Various countries are at different stages of the economic cycle; not all stock markets go up at the same time.

Picking a relatively low-risk fund with long-term growth prospects can be difficult, with a choice of more than 150 unit trusts. Just as in the UK, the 75 per cent rule seems to operate: over a given period, three-quarters of fund managers fail to beat the overall performance of the stock-market index. There are, however, one or two international growth unit trusts that now offer a significant amount of international index tracking - and since they offer portfolios with more than half their holdings in the European Union, investors can use them in their general PEPs, the most tax-efficient means of investment.

Kleinwort Benson Global Equity Trust is one such unit trust. Launched just over two years ago, it has more than 800 investments spread around the world. It aims to have half its holdings in the UK and the rest overseas, taking the average life fund as its benchmark. Minimum investment is pounds 1,000, or pounds 50 a month. The managers make an initial 5.5 per cent charge, reduced to 3.5 per cent for PEPs, and a 1 per cent annual charge. The fund currently has 49 per cent of its portfolio in the UK, with overseas investments split between 15 per cent in mainland Europe, 10 per cent in the US, 12.5 per cent in Japan, and 10 per cent in the Far East and Australia. Half the remainder is invested in emerging markets via UK investment trusts; the rest is in cash.

Paul Kelly, the fund manager, takes a top-down approach, looking at world-wide economies to decide asset allocation. "We do not look at individual stocks," says Mr Kelly. "We track indices. Our target is to match the central index of the areas we invest in. This includes the FTSE 350 in the UK, the S&P 500 in the US, Eurotrack 100 for Europe, the Nikkei 300 in Japan, and so on." He adds: "Because the fund is investing in core holdings in each country and does not have a high turnover of stocks, it keeps dealing costs relatively low."

With such a wide spread of investments, Kleinwort believes it offers investors a low-cost means of buying into a highly diversified portfolio.

The fund also employs tactical asset allocation, used to invest for only a month or two when the manager sees interesting short-term opportunities. Using the futures market, it enables the fund to switch quickly and cheaply between different economies, normally the UK, US and Japan. Costs are only pounds 2 a contract worth pounds 100,000, compared with much higher charges for buying and selling shares. So if the manager thinks, for example, that the US market looks cheap, he can sell futures in the British index to buy them in the S&P 500.

These investment techniques were originally developed by Kleinwort Benson for use in its successful institutional investment management business, looking after pension funds for large companies and local authorities.

Funds such as KBUs Global Equity Trust are firmly in the long-term growth category and are not for investors looking for a high income. Since launch the fund has grown by 37.5 per cent, including income being reinvested, and 7.8 per cent over the last year, which is satisfactory rather than spectacular. Its aim is to outperform its competitors over five and 10 years. With a highly diversified portfolio and advanced fund management methods, Kleinwort believes that investors will see less volatility, as well as benefiting from long term growthn

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

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Web Developer - PHP

    £16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Recruitment Genius: Credit Controller / Customer Service

    £18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

    Guru Careers: In-House / Internal Recruiter

    £25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

    Day In a Page

    Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

    Auschwitz liberation 70th anniversary

    Woman sent to three Nazi death camps describes surviving gas chamber
    DSK, Dodo the Pimp, and the Carlton Hotel

    The inside track on France's trial of the year

    Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
    As provocative now as they ever were

    Sarah Kane season

    Why her plays are as provocative now as when they were written
    Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

    Murder of Japanese hostage has grim echoes of another killing

    Japanese mood was against what was seen as irresponsible trips to a vicious war zone
    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea