Oct 16 2014

Fixed income exposure pays off for F&C

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A high fixed-income allocation has worked well for the F&C MM Navigator Distribution A Acc fund, returning 32.47 per cent in the past three years.

The £990.06m fund aims to generate a total return with an emphasis on income distribution, but to find some capital growth by investing in shares or units of collective investment schemes, whether regulated or unregulated, and possibly closed-ended funds.

Fund managers Robert Burdett and Gary Potter said they remained broadly positive about the global economic outlook, particularly in such areas as China, America, the UK and Asia, but that Europe remained a problem.

They added that Japan had been disappointing, but they expected progress to be made.

The fund has a 32.93 per cent exposure to fixed income, a 20.38 per cent UK exposure and a 19.59 per cent specialist exposure.

According to its latest factsheet, the strongest returns over the summer came from Prusik Asian Equity Income, which was up 4.82 per cent at the end of July.

The weakest performance came from BlackRock Continental European Income, which was down 3.29 per cent over the month.

During this period, the fund increased its specialist weighting at the expense of its UK and fixed income weightings, which were both reduced.

The fund managers acknowledged possible causes of volatility in coming months, from the prospect of a UK interest rate rise before Christmas to a more general nervousness in the markets.

But they said fixed income had started to become less attractive, with flows suggesting that investors had been leaving US fixed income already.

The minimum investment is £1,000 and the management fee is 1.5 per cent.

The Swip Multi-Manager Diversity Fund, owned by Aberdeen, is in the same IMA sector, but has seen lower returns of 17.17 per cent over the past three years.

It seeks long-term capital growth in excess of inflation through investment in a portfolio which gives exposure to a wide range of asset classes and geographic regions.

Its strategy is to predominantly invest directly or indirectly in collective investment schemes, the majority of which will be managed with the aim of participating in rising markets and reducing participation in falling markets.

The £62.12m fund’s greatest allocation is to alternatives, which make up 35.3 per cent of the fund.

In the latest factsheet, the fund’s managers Mark Harries and Simon Wood noted that equity markets for the US, Asia (excluding Japan) and the emerging markets had performed well, with Europe proving to be an exception.

They added that, for the second quarter, both the government bond markets and property markets had performed well because of robust demand.

The fund has an initial charge of 5 per cent, an annual management charge of 1.25 per cent and ongoing charges of 2.24 per cent.

Adviser says...

Jack Rawcliffe, investment analyst for London-based Holden and Partners, said: “The F&C MM Navigator Distribution fund offers a well-diversified solution for income-seeking investors who possess a medium level of investment risk.

“Exposure to 36 individual funds across a multitude of asset classes and geographies mitigates non-systemic risk to a large extent, yet performance has consistently been superior to that of its peers, and the income generated has routinely exceeded 4 per cent.

“The Swip Multi-Manager Diversity A fund is aimed at investors who desire a fund-of-funds vehicle with a balanced approach to risk management.

“Rather in contrast to its ‘diversity’ designation, the fund only uses 16 individual holdings, which one cannot help feel is a little on the low side from a diversification perspective, even if each is chosen as a result of the most thorough due diligence.”

F&C MM Navigator DistributionSWIP Multi-Manager Diversity Fund
Top five holdingsTop five holdings
Johcm Uk Equity Income Y Inc 5.54%
Ardevora UK Income C 4.99%
PFS Twentyfour Dynamic Bond I Net Inc GB 4.18%
Legg Mason Income Optimiser X Inc 4.15%
Schroder Strategic Credit L Inc 3.93%