221. Balance is best, but in an inflationary environment, equities are key
Matthew Page, co-manager of the Guinness Global Equity Income fund, talks to us about how company...
After the glut of 90 matches in six weeks, it’s been a long, slow summer, but thankfully the Premier League is back to entertain all football fans this Saturday.
While matches will be played behind closed doors for some time to come, excitement and anticipation levels will still be high: every fan welcomes the clean slate and hopes this might be their year. As a Chelsea fan I’m particularly confident, having seen my team splash out over £200m on an array of new talent. Our millennial writer is more hopeful that newly promoted Fulham will stay up.
Read more about how to invest in football
It’s also the week when many of us look to get our fantasy football teams in shape, as we go head to head with friends and office colleagues. My track record is not the best – my 12 year old son beat me last year – but I always look to strike a good balance between defence and attack, as well as adding the odd player who has gone under the radar.
There are a lot of similarities between fund research and fantasy football: despite all the prep and due diligence, your best laid plans can go awry, so you need to be flexible. And that’s exactly the type of attitude investors should be looking to employ in these uncertain times.
Below are five fantasy fund picks to help you prepare for every scenario.
Everyone needs a good goalkeeper to avoid coming unstuck now and again and, in these uncertain times it’s never been more important to have a strong focus on the downside.
For this I’d choose the Janus Henderson UK Absolute Return fund. It aims to deliver a positive absolute return over rolling 12-month periods and, in the last ten calendar years has only posted negative performance once: -2.7% in 2018*. This year, when markets fell due to the global pandemic, the fund fell 4%** – while the UK stock market plunged more than 30%** – and was back in positive territory within three weeks. The managers look to identify stocks that will either exceed or fall short of analysts’ expectations and construct a portfolio of both long (profit when the share price goes up) and short (profit the when share price goes down) positions.
Co-manager Ben Wallace, explained how he achieved this in this podcast:
Defenders who can also score and create a few goals are like gold dust in fantasy football, simply because they offer more than one way of scoring points.
A good fund which offers this type of flexibility through a ‘go-anywhere’ mandate is Nomura Global Dynamic Bond. It is an unconstrained strategic bond fund, with a focus on total returns. Manager Richard Hodges blends two approaches when building his portfolio. First, he studies the state of the global economy and identifies which sectors and investment themes look most attractive. He then undertakes fundamental analysis, to populate his preferred areas with ideas.
Having been defensively positioned going into the year, Richard was not afraid to make the most of opportunities presented by market falls, by increasing his weighting to corporate bonds from 2% to 21% in March, as he told us in this interview.
You want your midfielder to do a bit of everything – defending, creating and, most importantly scoring (how I wish we still had Frank Lampard on the pitch!!!).
For this, I’ve chosen a rock-solid global income fund in the shape of Guinness Global Equity Income. The portfolio typically consists of around 35 equal-weighted stocks, which the managers aim to hold for three to five years. They focus on how well, and how consistently, a company can use money to generate returns. They also have substantial freedom to entirely avoid countries and sectors they don’t like. The managers look for growing, rather than high, income and the one-in, one-out philosophy means the fund stays up to date with the managers’ best ideas, because they have to consider the worst of their investments, rather than simply adding a position. So far this year, dividends from the companies in the fund have held up better than the wider market.
Goals pay the rent… the words of legendary commentator David Coleman, and he wasn’t wrong. Your striker is often the jewel in the crown, who always delivers 20 goals a season.
For this I’d choose Marlborough UK Micro-Cap Growth – a fund which has comfortably been a top quartile performer in the IA UK Smaller Companies sector over the longer-term and delivers year in, year out. It invests in small and micro-sized firms and is run by the astute and pragmatic stock pickers Giles Hargreave and Guy Feld. The managers like to invest in a large number of companies (185 as at 31 July 2020*) to diversify individual stock risk, whilst making the most of every opportunity, and the fund has performed well across a wide range of market conditions making its long-term track record exemplary.
There’s always a surprise package or two each season and, if you can back one of these players early it often pays big returns as a diversifier.
For this, I am going to go down the value route – as the UK is still suffering a significant Brexit hangover, which is hurting a number of value funds – however, should this dissipate, it could be a major opportunity to tap into an unloved area of the market. The Man GLG Income fund is primed to do just that. Moreover, while it invests predominantly in UK companies it can also invest in the shares of European companies that derive a substantial part of their revenues from the UK, and in a company’s bond, rather than its equity. The flexible mandate allows the manager to find value in parts of the income market many other managers may ignore.
*Source: Fund factsheet at 31 July 2020