Five funds to help you to navigate markets

Deciding where to invest your money isn’t easy, particularly when you consider the ‘unknowns’ that are out there right now.

Will the UK stock market be negatively impacted by a hard Brexit? How long can the US stock market continue to rise? Have emerging markets lost their edge? Are government bonds still the safe haven they once were? Is the property market under pressure? The list of questions goes on.

So what can investors do to make the most of prevailing conditions?

Read more tips on how to build an investment portfolio.

Here, we take a look at the funds that do the hard work for you by choosing which geographies or asset classes to invest in your behalf. Effectively, they are designed to help you to navigate different market conditions.

Equity markets

Although we are almost 10 years into an equity bull market, there has been a divergence in geographical performance this year. The US continues to perform well, but other markets have struggled. T. Rowe Price Global Focused Growth Equity invests in companies from around the world, including emerging markets. The manager, David Eiswert, looks for businesses which have the potential to generate above-average and sustainable rates of earnings growth. The fund is currently overweight US equities (63%*), China, Taiwan, India and Sweden. Meanwhile, the manager is underweight Japan and the UK. He likes technology companies at the moment, with Amazon, Alphabet and Tencent featuring in his top 10.

Bond markets

Bond markets have enjoyed a bull market for the past 35 years or so, but are now starting to come under pressure. UK government bond prices, in particular, have fallen, causing yields to rise. In light of this, many bond fund managers are lowering risk in their portfolios. The Jupiter Strategic Bond fund has the flexibility to invest in fixed income markets across the world. Its manager, Ariel Bezalel, has demonstrated an aptitude for reading the economic cycle. This, combined with solid security selection, has seen the fund perform well. Ariel also has a strong focus on downside risk – preserving capital to the best of his ability – which should provide investors with some comfort.

Market volatility

The ups and downs of markets can leave investors feeling uncomfortable. While volatility can create opportunities, it can also keep us awake at night. Rathbone Strategic Growth Portfolio, is amongst the new breed of funds that sit in a ‘volatility managed’ sector. Manager David Coombs and his team run this multi-asset fund with an outcome-focused approach, and have complete flexibility over where they invest in order to achieve that.
They look to generate returns of cash plus 3-5% per annum over a market cycle. At the moment, the fund has a ‘worry bucket’ full of defensive investments like gold and Australian bonds. In addition, they have a ‘structural growth’ bucket with equity holdings that should do well wherever we are in the market cycle. The team does not hold any assets that are reliant on a buoyant economy.

Asset allocation

It’s all in the name with this fund: F&C MM Navigator Distribution. It is a fund of funds and can invest in any asset class. The managers have worked together for many years and are among the most experienced in their field. They have shown skill not only in their ability to find less well-known funds, but also in their asset allocation. They operate under a set of guiding principles rather than rules, allowing them to adapt the portfolio through investment cycles. The team aims to produce consistent income distributions and long-term capital preservation. The fund currently has a yield of 4.7%*.

Irrational behaviour

When we are undecided about something, the easy option is to follow the lead of others. But this can sometimes be a mistake, as their goals may be very different. M&G Episode Income is a multi-asset fund which invests directly in individual stocks and bonds, while property exposure is gained via property funds. The term “episode” in the name refers to those periods of time when investors’ emotions cause them to act irrationally. Manager Steven Andrew uses behavioural finance to find pockets of value and invests against the herd rather than following it. He actively manages asset allocation to produce monthly income and maintain the fund’s volatility within acceptable limits. The fund currently yields 2.7%*.

*Current portfolio positioning for all funds mentioned is sourced from the fund fact sheets as at 31 Au August 2018.

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.