The thing to do most of the time is nothing
A great deal has changed in fund management since 1984, when Jim Stride started running the Axa Distribution fund.
Technology has exponentially increased the speed at which Axa’s head of UK equities can access the valuations of his portfolio. In the 1980s, valuations were delivered once a day by van. Now, Mr Stride and his team can access instant valuations online as the day progresses.
What has not changed very much, however, is the way the £790.5m Distribution fund is run. Since 1985, when Mr Stride took the decision to ditch much of the fund’s exposure to convertible bonds, the Distribution fund has maintained a simple target asset allocation of 55 per cent in equities, 35 per cent in inflation linked gilts, 7 per cent in other gilts and 3 per cent in cash.
Since then, the Distribution fund has expanded into Axa’s biggest fund franchise, sparking nine offshoots. The £604m Defensive Distribution fund launched in 1990, followed by the £322m Global Distribution fund in 1999 and the £84m Ethical Distribution fund in 2008. The range also includes life and pension products such as the High Yield Distribution and Retirement Distribution funds. Together the nine funds cater for more than £13.6bn in assets.
Almost every one follows the asset allocation template Mr Stride has laid out – and it has been a successful one.
The original Distribution fund has behaved just as investors would want a naturally cautious fund to behave. Over 10 years to September 4 the fund posted a 74.43 per cent return, not ‘shooting the lights out’ compared with some of its peers but beating the average 63 per cent return from the IMA Mixed Investment 20-60 per cent Shares sector.
Longer term, the slow and steady approach translates into an impressive record – an investor putting in £100 at the Distribution fund’s launch in 1979 would be sitting on more than £2,300 now. Of the other three retail funds in the Distribution franchise, all have beaten their sector averages over three years, so the strategy has proven transferable and adaptable to different audiences.
“It’s quite an attractive asset mix from the point of view of giving stability over time to market fluctuations,” Mr Stride says. “It’s designed not for people who want to maximise their wealth but for those who want to take that initial step or lower risk step into the market. It’s specifically targeted at more cautious investors rather than those looking for maximum excitement.”
We are living in a period where people are more cautious than ever due to ongoing political tensions, precarious sovereign debt levels and stock market volatility. It is no surprise to hear Mr Stride draw comparisons to the market crash of 1987, which happened just three years after he took the helm.