David Hambidge is at the helm of this £715m fund, the aim of which is to produce growing long-term income plus some capital growth.
It is an Investment Adviser 100 Club member for the second consecutive year and is one of three multi-asset vehicles run by Mr Hambidge and Premier’s multi-asset investment team.
The portfolio is “multi-asset, multi-manager and multi-structured”, the manager says. The multi-asset aspect provides a “much smoother growth profile than equities alone”.
“The multi-manager aspect not only greatly reduces stock-specific risk, but also enables us to access the best fund manager talent both in the UK and overseas,” the manager adds. “While the majority of the portfolio is made up of open-ended funds, we will also use closed-ended vehicles, particularly when we feel that a fixed capital structure is more suited to the asset class we are looking to access.”
Both a top-down and bottom-up approach are considered when selecting holdings. Mr Hambidge insists each position in the fund must contribute to the revenue account and that within equities those funds that prioritise income and have a “progressive income culture” are favoured.
There have been several changes to positioning within the past 12 months. Mr Hambidge explains: “The portfolio has been underweight equities compared with its sector average for a number of years, although we have recently added to UK large caps and Asian equities following the recent downturn. Elsewhere, we have introduced a position in convertibles, which we are confident will provide us with a similar income to equities, but with a smoother overall capital return.”
The portfolio sits firmly in the middle of the risk-reward spectrum at level four out of a possible seven, meaning it is neither particularly high nor low risk. An ongoing charge of 1.42 per cent applies to the clean class C-shares for retail investors.
The fund has delivered positive returns across one, three, five and 10 years, outperforming its peer group and showing little sign of holdings having been affected by the market volatility during the summer. Data from FE Analytics shows the vehicle generated a solid 62.7 per cent in the 10 years to October 15, while the average return for the Investment Association Mixed Investment 20-60% Shares was 46.5 per cent. Performance has held up well in the past 12 months, in spite of market turbulence, returning 8.2 per cent versus the sector’s 4.9 per cent.
Mr Hambidge acknowledges the vehicle is “enjoying another strong year”. He notes: “Risk-adjusted returns have also been excellent, and more importantly for many investors is the fact that the fund has continued to deliver a relatively high and very consistent income stream.”
He cites the portfolio’s overweight position in UK commercial property as having contributed to that performance. “UK commercial property has been a favourite hunting ground for us for more than two years and while we remain positive for the sector in next year and beyond, we have now taken some profits to fund our equity and convertible positions,” he says.
However, underweight positions have also had a positive impact on recent performance. “An underweight position in equities hasn’t done the fund any harm this year, with both the UK and global stockmarkets struggling to make any headway following a sizeable drawdown during the past six months,” the manager points out.
“Traditional fixed interest investments have had a challenging year, with the volatility of longer-duration assets increasing significantly. Having an underweight position in bonds with relatively little interest rate sensitivity has also helped this year, with a number of our bond holdings producing solid returns.” Mr Hambidge hopes exposure to floating-rate debt will help “insulate” the portfolio when interest rates eventually rise.
While the manager has fared well in terms of positioning the fund in UK and international equities, its emerging markets exposure has detracted from performance. “But even here we are being compensated with a very attractive dividend and are confident that total returns will improve in the not-too-distant future,” he adds.
EXPERT VIEW
Rob Morgan, pensions and investment analyst, Charles Stanley Direct
This fund is a strong performer in the IA Mixed Investment 20-60% Shares sector and held up well amid the recent volatility. Exposure to bricks and mortar property funds has been helpful, and these represent around 15 per cent of the portfolio. The usual core of equity and bond funds is dominated by long-only UK equity vehicles and more total return-minded fixed interest funds such as the TwentyFour Dynamic Bond. There are some alternatives, including the Foresight Solar trust and Polar Global Convertibles fund. The team has made some decent asset-allocation calls in the past and I would view this as a solid core holding for income investors.
