FTAdviser.com

Advertising

The broad rules governing the IMA Balanced Managed sector mean it is home to a wider range of funds than can be found in the majority of sectors. The geographical and asset split across funds can vary greatly, as can the performance at any given point in the market cycle.

In direct correlation to this is the stark difference between the top and bottom funds in the sector. At the upper end of the spectrum, the £3.5m CF Cheviot Balanced fund returned 11.1 per cent over one year to 22 September, while the MFM CFS Balanced Opportunities fund lost a staggering 24.5 per cent over the same period, taking it to the bottom of the 126 fund peer group. The average for the sector was a loss of 13.2 per cent.

How did the Cheviot offering manage to buck the trend and generate such stellar performance? As a fund of funds, it has the scope to be able to utilise the expertise of the underlying managers, as well as using them to access more esoteric assets.

Good examples of more unusual stories the manager has been able to gain exposure to are Chinese real estate through the China Real Estate Opportunities fund and infrastructure through the HSBC Infrastructure trust.

There is also a good mix of familiar onshore retail funds, as well as some less familiar offshore offerings, such as Findlay Park American Smaller Companies and Tosca Asia.

Overall, UK equities makes up the largest proportion of the fund, at 34 per cent, and there is a relatively large holding in cash, at 14.3 per cent. Infrastructure also contributes to the defensive stance that has stood the fund in good stead over the past year. This is tempered by some more aggressive exposure to the emerging markets, allowing for an appropriate balance and ensuring diversification.

The danger is with this fund, as well as other multi-manager offerings, is the extra charges it attracts and a higher than average total expense ratio. However, with such strong performance lifting it far above the rest of the peer group (second-in-the-sector £110.5m CF Ruffer European returned 6.1 per cent over the same period), the extra cost that it might attract is easily absorbed.