Investments  

Fund review: Lombard Odier Funds Golden Age fund

This article is part of
Fund Review: Global equities

This fund from Lombard Odier is a play on the theme of the ageing population trend now evident in many developed countries.

It is a high-conviction fund that was launched in November 2009 with a bias towards developed markets and sectors such as healthcare, consumer discretionary and financials.

Co-manager Johan Utterman points out there are expected to be 2bn people worldwide who are more than 60 years old, accounting for more than one-fifth of the population, and that by the end of this decade the spending power of that demographic will be $15trn (£10.2trn).

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He says: “In short, today’s elderly own a sizeable proportion of financial assets in developed markets, which makes them profit from any economic recovery. Yet they can also rely on relatively generous pensions and personal savings, making them less vulnerable to economic downturns.

“We think that if share prices appreciate in line with earnings growth, a portfolio geared to this investment theme should outperform the broader market over time.”

When it comes to the investment process, Mr Utterman says while the majority of time is spent on bottom-up fundamental analysis, he and co-manager Meret Gaugler also use a top-down overlay to determine asset allocation between sectors and geographies.

“We monitor macroeconomic trends to make sure we spend our time efficiently and capitalise on tailwinds. These include fiscal policy, monetary stimulus, inflation, unemployment, GDP growth, consumer confidence, government regulations and foreign exchange rates,” he adds.

The managers have also put in place a stop-loss rule that helps the portfolio avoid “major blow-ups”. He says: “We only invest in cash-flow-positive companies with a minimum market capitalisation of $500m. We halve any position that goes 15 per cent against us and exit at -20 per cent.”

Mr Utterman admits they have found more new ideas in sectors outside their three core areas of healthcare, consumer discretionary and financials.

“For example, there are a lot of exciting developments in technology, and we keep an eye on the likes of Google X to stay abreast of smart contact lenses and next-generation DNA-sequencing projects,” he notes.

The fund is placed at the riskier end of the risk-and-reward spectrum at level six, while the clean retail ‘category M’ share class has ongoing charges of 1.92 per cent, according to the Key Investor Information Document.

LOF Golden Age is overweight European and Japanese equities and, within the United States, prefers domestic players over multinational exporters.

Since inception, the fund has delivered a top-quartile performance across one, three and five years, according to FE Analytics, beating both its peer group, the Investment Association Global sector, and its benchmark, the MSCI World index.

Over five years to April 8, the fund generated a respectable 73.22 per cent against the sector average of 49.74 per cent, and a gain of 65.57 per cent made by the index.

Mr Utterman observes that the portfolio has outperformed in both up and down markets. He highlights: “While some of the holdings are defensive and more economically resilient, others are economically sensitive and benefit from higher consumer confidence.