The last two quarters have seen some strange market performance, but maybe it is the growing influence of exchange traded funds and passive funds, that returns are not based on valuations.
With regard to equities, Toone describes the market as having been “a bit strange” over the last six months. “The quality goes up and down. We favour Neil Woodford-type funds. The market has been a broad brush. Maybe it’s the growing influence of exchange traded funds (ETFs) and passive funds that returns are not based on valuations. Nothing’s stood out.”
Tim Cockerill, the head of research at Ashcourt Rowan, highlights the Invesco Perpetual Bond fund as a key performer within his Balanced portfolio over the last six months. “We’re using the FTSE All-Share as a benchmark, and it’s been surprisingly strong. The Artemis Strategic Bond fund has also done well. Although equity markets seem to have been quite strong, bond funds have put in good performance.”
Cockerill has also been pleased with the performance of Artemis Income. “We see it as the backbone to the portfolio, as with a vast number of our model portfolios. We don’t expect anything too exciting; just long-term steady performance. I think we will see quite a lot of value [from this fund]. Schroder European Alpha Plus has also done well. The name suggests probably it’s a bit more racy, but actually the way it’s managed it’s quite conservative. That’s put on quite a nice performance.”
One fund which has performed less well, says Cockerill, is L&G Growth. “It’s quite concentrated, with 25 stocks. We know Robert Churchlow and what he’s doing and it’s also about the team. In the short-term it’s been a bit disappointing but often we stick with funds for a long time if they are delivering in the long term what we want. It’s just going through a poorer patch which all funds have.”
Another laggard in Cockerill’s AFI Balanced portfolio is M&G American. “I suspect that is a currency issue. Between March and October the dollar has got weaker, which will have been a factor. It looks like the fund’s performance has been disappointing, but we come back to the process. It’s very fundamentally driven and not about macroeconomics. We don’t have any qualms about the process.”
At the next AFI rebalancing Cockerill will be moving out of Investec UK Special Situations, which has been a long-term holding but has delivered weaker performance of late. He is replacing it with M&G Recovery. “It’s among the most consistent UK funds and broadens out the underlying portfolio for us.”
He will also be cutting his exposure to corporate bonds via his holding in the Investec Corporate Bond fund. “The reason is at some point we feel fairly strongly there will be a sell-off in bonds, so we’ve made a small move to reduce exposure on that front.”