Why diversification is the only investment outlook that matters
TB Wise Multi-Asset Growth fund manager Vincent Ropers gives us an update on his exposure to value...
It’s not an easy time to be an investor. Global stock markets have rebounded significantly over the past year, but with conflicting economic data and rising concerns about new variants of coronavirus, no-one is sure how the coming months will play out.
Various markets are unlikely to have the same experiences. For example, the global economy is expected to expand 5.6% in 2021, which would be the fastest post-recession pace in 80 years, according to the World Bank*. While this would largely be due to strong rebounds from a few major economies, the headline figures hide the fact many emerging economies continue to struggle with COVID-19.
It’s a point acknowledged by David Malpass, the World Bank’s group president, who is keen to put welcome signs of a global recovery into context. “The pandemic continues to inflict poverty and inequality on people in developing countries around the world,” he said.
It’s always a challenge to invest in such conditions. There are myriad questions to be answered as you try to piece together an investment portfolio. Which asset classes should be considered? Are equity prices likely to rise? Do you need to steer clear of certain areas of the world?
One increasingly popular option are funds in the IA Mixed Investment sectors, which blend asset classes in various ratios, depending on an investor’s attitude to risk.
For example, funds in the Mixed Investment 0-35% Shares are allowed up to 35% of the portfolio to be invested in equities. However, at least 45% has to be in fixed income and/or cash. In contrast, funds in the Mixed Investment 40-85% Shares sector must have between 40% and 85% invested in company shares and there are no limits on fixed income or cash exposure.
Billions of pounds have been invested into the Mixed Investment sectors over the last few years as investors have been drawn to the flexibility they provide. Net retail sales into the Mixed Investment 40-85% Shares sector reached £8.3bn** alone in the past year, pushing assets under management up to £85.7bn***, according to the Investment Association.
Mixed Investment 20-60% Shares now has £57.6bn*** under management, while the Mixed Investment 0-35% Shares has £14.6bn***. Finally, the amount invested in the Flexible sector has risen to £35.5bn***.
The figures mean Mixed Investment 40-85% Shares is the fourth largest out of around 50 sectors, in terms of assets under management***. Investment Association data also reveals it was the best-selling sector among investors in May this year – and the second best in both June and July.
Let’s take a look at some mixed investment funds that may be worth considering.
Liontrust Sustainable Future Managed
This fund is in the Mixed Investments 40-60% Shares sector and uses a ‘sustainable future process’ which is based on the belief that companies likely to thrive are those which offer particular qualities. These are companies that improve people’s lives, drive improvements in efficiency, and help to build a more stable, resilient and prosperous economy. The fund invests in a combination of global equities, bonds and cash.
TB Wise Multi-Asset Growth
This fund sits in the Flexible sector and so the manager is afforded a significant degree of discretion over asset allocation and is allowed to invest up to 100% in equities. TB Wise Multi-Asset Growth invests in around 30-60 underlying funds and investment trusts, with a preference for out-of-favour areas. Turnover of underlying funds in the portfolio tends to be very low.
Artemis Monthly Distribution fund
The aim of this fund is to generate a monthly income, combined with some capital growth, over a five year period. It is in the Mixed Investments 20-60% Shares sector. Jacob de Tusch-Lec manages the equities portion of the portfolio, while James Foster looks after the fixed income component. Currently, the fund has 46.2% ^of assets in equities, 32.1%^ in non-investment grade bonds, 17.5%^ in investment grade, and 3.6%^ in government bonds, as well as cash holdings of 0.6%^.
*Source: The World Bank, 8 June 2021
**Source: Investment Association, net retail sales, August 2020 to July 2021
***Source: Investment Association, funds under management sector rankings for July 2021.
^Source: Fund factsheet, 31 July 2021