Storms
So who has managed to weather the storm so far over the past year and further back over three and five years? Some significant performance has been achieved by MFM Slater Growth; Cazenove UK smaller Companies; Liontrust Special situations; Fidelity Moneybuilder Dividend; Invesco Perpetual High Income; Standard Life GARS and Schroder Income Maximiser to name but a few quality funds.
In the past, advisers and investors have been wrestling with this choice between active funds or passive funds rather than multi-manager but interestingly enough this time around over the first quarter of 2012 saw a shift in behaviour. The tried and tested pattern of running for cover in cash is no longer a sensible option for significant parts of any portfolio holdings due to the continuing poor deposit rates, inflationary threats and limited opportunities for tax-free deposit holdings. Similarly, the school of thought that has favoured passive holdings in index trackers does not look compelling right now as indexes round the world continue their gyrations and predominantly downward direction.
One of the main areas of investment interest has been into “income” producing funds with M&G Optimal Income attracting some £915m, closely followed by Standard Life Investments Global Absolute Return pulling in over £820m of investor money. This demonstrates a significant shift of investor focus and suggests to me that it is the continuing attraction of equity income that is of prime importance for retail investment clients.
This should be viewed as a very positive sign and may be evidence that slowly but surely, the penny is starting to drop about how important diversification of asset allocation really is to the success of any portfolio. Combine this with the skills and track record of the fund manager - for example Richard Woolnough at the helm of the Optimal Income fund will also be a huge contributor to the attractiveness of the fund in difficult market conditions.
Investors should be mindful that in very difficult market conditions, quality funds should be number one on the shopping list. Part and parcel of these funds should be a significant contribution made by dividend stream being generated by the underlying assets and contributing significantly to the returns for the investor. On the face of it one would think that multi-manager funds would be in tune with this contribution and benefiting by incorporating it into their fund strategy as are the active single manager funds - if they are, then the comparative performance does not evidence a strong case for multi-manager as opposed to single fund selection when creating a portfolio.
