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David Jane, manager of M&G's £714.3m Managed fund, is not afraid to go against the grain of his peer group. In fact, he believes his fund's outperformance of IMA Balanced Managed over three and five years is due to this individualistic flair.

He declares: "If you are leading, they can see you but you can’t see them and that is my philosophy. I have to do what I think is right and that has led me to have hugely different positions to my peers and that is why we have done so well. If we have a view, we tend to be 10-15 per cent away from the IMA sector with that view."

For a once fettered fund of fund, now evolved into a multi-asset managed fund, Mr Jane is scathing of what he perceives to be an old style of managing funds in this sector: conceiving asset allocation in the "two dimensions" of UK equities and UK bonds then tinkering with the weightings range.

Mr Jane's approach is to understand the fund in multi-dimensions, applying an investment house world view to valuations and whether that view is priced in, and then considering the result through comparisons with the way the market is actually behaving in the present. He says this works particularly well for a multi-asset class fund of fund, and again goes against the usual fund selection strategy.

"We don’t monitor a huge range of funds or a huge range of equities to determine what we want to look at first. It is the opposite of what most people do. For example, what is the best way of getting UK equity exposure with whatever bias and with a certain sector bias? The new rules on these funds mean you have more assets available to allocate around and more flexibility to make those decisions more freely, flexibly and cost-effectively," he says.

He describes the M&G Managed fund as "an all-seasons, long-term savings product" with a risk characteristic situated between the Cautious and Active Managed sectors. For investors who like a manager to have aligned incentives, knowing that Mr Jane and his mother both invest in this fund will no doubt be well received.

The fund's move from fettered to multi-asset in December 2006 creates few constraints other than holding no more than 85 per cent in equities. However, this multi-asset remit permits the fund to use equity-like assets such as property funds, forestry, currency and some bonds - although Mr Jane sees himself as an "opportunistic bond holder" - to achieve higher returns through uncorrelated "equity-lite" asset classes.

"It's about risk. Keep equities well diversified and then look for higher return assets that achieve equity-like returns that are not correlated to equities. I believe this fund should heavily bias itself towards long-term, high-return real assets and through portfolio construction and diversification keep the risks down," he says.

The 2006 change also permitted the introduction of derivatives, futures and ETFs to manage equity exposure, which Mr Jane says helps him get on with the job in the quickest, cheapest and most efficient way. "Efficiency is about the purity of the exposure and cost - dealing and long-term management charges. Each fund must earn its living. If I can buy an index for free, why would I opt for management charges?" he says.

Such "esoteric assets" never total more than 10 per cent of the portfolio and although no futures positions are present at the moment, Mr Jane says there will have been such positions for two-thirds of the last year. Although Mr Jane questions the usefulness of a regulatory required disclosure of top-10 holdings - he believes it does not fully reflect the risk reflected in the portfolio's holdings - he shrugs off concerns about M&G managing nine of the top-10 underlying funds.

He explains: "It’s hard to find manager who are better than the ones we have got. For example, the M&G Recovery Oeic is far and away the best UK all companies fund in the market and I get it for free. If I want UK equity beta exposure, I wouldn’t be doing my job properly if I went for a third-party fund there. I don't think I am better at investing in UK equities than Tom Dobell, so I’m obligated to buy this fund, and it’s free. The same goes for the M&G American fund, I would struggle to find better; Pan European, Giles Worthington has exceptional stock-picking ability. It would be silly to incur 150 basis points of charges just so this question is easy to answer."

Management charges from underlying M&G funds are rebated back to the investor, so Mr Jane believes that even by adopting a "best of breed" approach, these funds have truly earned their place in the portfolio. Given the Managed fund's performance, this is hard to argue against. While the IMA Balanced Managed sector fell by 7 per cent over one year, M&G Managed dropped by only 5.2 per cent. Over three years, M&G's fund returned 20.7 per cent to investors compared with a sector return of 13.5 per cent, although its risk ratio is slightly above the sector mean of 3 per cent, at 3.3 per cent.

The recent addition of Societe Generale's Japan fund (4 per cent portfolio allocation) exemplifies the diversified approach to equities, Mr Jane says. Pharmaceuticals are a recent big play, while gold and commodities, both held in ETFs, have been dropped. Mr Jane is bullish about the global outlook and inflationary pressures, yet believes sterling's weakness will continue. The portfolio has a large exposure to the US (28 per cent) while 20 per cent underweight UK compared with its peers.