David Hambidge, head of multi-asset and manager of the fund at Premier, claims this outperformance is a direct result of a key focus on valuation and the willingness to move into unloved sectors. The aim of the fund, which sits in the IMA Mixed Investment 40-85% Shares sector, is primarily growth, but it has the added aim of looking to deliver a modest yield of somewhere in the level of 2.5 per cent.
Mr Hambidge says: “We think there are a lot of investors out there who like to receive something from their investment on a fairly regular basis in terms of dividend income. That’s what we’re looking to do. Being multi-asset, we’re looking to deliver superior risk adjusted returns over the medium term.”
The investment process of the multi-asset team, which includes head of research Ian Rees and senior investment managers Simon Evan-Cook and David Thornton, is a combination of both top-down asset allocation and bottom-up fund selection.
Mr Hambidge explains: “We are quite simply looking to blend the best of breed managers. We’re looking to own funds and managers who, over the cycle, will perform well. We are also multi-strategy in that we invest primarily in open-ended funds, but there are a lot of assets out there that we think are more suited to the closed-ended environment. So we will invest in investment trusts if we think the underlying assets are better suited to that closed-ended structure.”
Although the team does look at the macro environment, the manager emphasises that the process is all about valuation and relative valuation, “so we spend a lot of time in discussion about what is being priced into the asset”.
Mr Hambidge notes the fund does not invest in a particular country, region or sector just because it’s doing well – in fact almost the opposite is true.
“You can’t ignore the macro and we don’t, but our approach is somewhat contrarian in that we are looking for areas that are effectively unloved by investors, then trying to be early into those and realising all the gains when there is a catalyst for change. In the case of Japan it was Abenomics.”
Unsurprisingly, as an Investment Adviser 100 Club member, the five-year cumulative performance has been impressive, with a return of 48.7 per cent to August 15 2013, compared with the IMA Mixed Investment 40-85% Shares sector average of 36.44 per cent.
However, the one and three-year figures are equally strong, with a three-year return of 38.27 per cent against a sector average of 29.76 per cent, while for the 12 months to August 15 the fund has outperformed the sector by 7.76 percentage points, with a return of 22.68 per cent.
Mr Hambidge attributes much of the success to what it has not owned as much as to what it has, particularly the lack of exposure to areas such as gilts, gold and emerging market debt. While the fund’s overweight position to Japan and exposure to Europe have all helped performance, the manager highlights the “modest exposure to smaller companies” that have performed well in the UK, Europe and Japan.
As the fund has only small positions in its holdings, the strong performance has come from a number of different positions across the portfolio.
It’s not all been plain sailing, as the manager admits the fund should probably not have been underweight US equities, but true to the investment process, while the US macro environment seems to be improving the team “doesn’t like the valuations of US equities”.
For investors looking for a consistent, diversified portfolio with the added extra of a regular dividend income, this could well be the fund for you.
EXPERT VIEW
Martin Bamford, managing director and chartered financial planner, Informed Choice:
“The cumulative past performance of this fund looks pretty good relative to the sector, but it has had a couple of periods of underperformance, notably from mid-2009 through to mid-2011. As a multi-manager fund for investors seeking an income, this fund represents a pretty good way of accessing a range of specialist funds that retail investors might usually overlook. Very few of the top 10 fund holdings would appear in most portfolios as they tend not to be popular on fund supermarket platforms, but they are selected and blended together in this fund very nicely. At just over £100m, this fund might not be viable long term, however.”
