Product review: Heartwood Defensive Multi-Asset

The latest launch from Heartwood Investment Management is the sixth in its multi asset range since December 2009.

The defensive fund completes Heartwood’s suite of multi asset funds and this latest addition to the line will focus on preserving the capital value of its portfolio.

Fund manager Martin Perry says that the launch has come at the right time as demand increases for products that are more constrained against downside risk and offer protection against inflation.

Lower risk assets make up the majority of its holdings with just 17% of its portfolio coming from equities. Approximately 35% is held in bonds, comprising UK government gilts (9%), UK index linked gilts (10%) and overseas index linked gilts (3%), with the remainder in high quality corporate bonds. Commercial property also features, comprising around 6% of holdings.

As with the other funds in this collection, the defensive fund is structured as a non-UCITS retail scheme. Perry says that this is to give greater flexibility to the underlying assets.

Annual management charges are 1.25% and, having launched on 1 February with £5m, Perry says that initial inflows suggest this should grow quite swiftly.

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Capitalising on the current risk averse attitude of the markets, the defensive strategy of this fund should be well received by investors still holding on to safe havens.

Fund manager Martin Perry believes that defensive is the right way to invest in a volatile environment. He says, “It is a good time to be launching the fund. There is a lot of nervousness in the market and a lot of volatility still expected.”

Heartwood’s other multi asset funds, which are split between two IMA mixed investment sectors of 20-60% shares and 40-85% shares, and flexible investment sectors, are by no means top performers in their respective sectors. Based on Morningstar statistics to 1 February 2012 none of these funds were in the top quartile in their respective sectors in any of their figures over the past two years that they have been available.

That said, although it is early days for this range from Heartwood it is definitely attracting interest, with more than £567m currently invested in the fund, accounting for nearly half of the company’s discretionary assets. And with some positive returns already being produced, for the low risk investor, this may be enough.

holly.black@ft.com