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Investors in Balanced Managed funds

This article is part of
Guide to Mixed Investments and Balanced Managed

Funds that are still called Balanced Managed are more suitable for a moderate risk investor, according to Adrian Lowcock, senior investment manager for Bristol-based Hargreaves Lansdown; “someone one who doesn’t want to be too adventurous.”

He says these funds suit new investors looking for a one-stop shop or could provide a way of getting a diversified portfolio through one fund for investors who are not interested in actively managing their investments.

Mr Lowcock says: “We often use them as a default option in corporate pensions. The fund we use is Schroder Managed Balanced.”

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Investors who want access to a wide range of global securities via a diversified, actively-managed portfolio should consider Balanced Managed funds, according to Richard Peirson, manager of the Axa Framlington Managed Balanced fund.

Mr Peirson says Balanced Managed funds aim to deliver long-term returns, largely from equities, and are generally appropriate for investors looking for capital growth, but without the volatility that a pure equity fund might generate.

Given their ability to diversify across equities, bonds, cash and other assets, Mr Peirson says Balanced Managed funds offer the potential for consistent investment performance over various market cycles.

Historically, he says the fund he manages has been invested around 75 to 85 per cent in equities and between 15 per cent to 25 per cent in bonds and cash.

James Dalby, market intelligence manager of Aviva UK Life, says the in-built diversification and ongoing manager monitoring of both the asset allocation and assets in Balanced Managed funds means they can be the bedrock of an investment portfolio around which single asset class funds can be built.

But ultimately there are no hard and fast rules with who should invest in Balanced Managed funds, according to Alistair Campbell, head of investment marketing at Skandia.

Mr Campbell says some investors – no matter what their risk outlook - just don’t want to deal with choosing from a wide variety of mutual funds.

Mr Campbell says: “They prefer having just a single, all-encompassing choice that they can buy regularly, offers them the potential of a decent return and which is more likely to avoid major volatility when markets take a negative turn, even though this can mean less upside when there is a bull market.

“A well-managed Balanced fund has the best chance at achieving this because when the stock market falls, the bonds tend to hold their value better, and when the stock market rises, bonds yields are typically lower.”

However, Mr Campbell says there are credible alternatives to Balanced Managed funds that offer investors and advisers more flexibility such as building bespoke portfolios or outsourcing the selection and management to investment specialists.

As with all sound financial decisions, Mr Campbell says the use of a Balanced Managed fund will be driven essentially by the needs and preferences of the investor.

Advisers operating centralised investment propositions based around a group of risk-rated funds may place investors into vehicles in this sector: just under a third of the 151 members of the 45-80% Shares sector have a Distribution Technology risk rating of between 5 and 6 on the 1-10 scale.