Contrarian ways do it for 7IM fund

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Contrarian ways do it for 7IM fund

An equity-centric approach, with diversified actively managed funds, has proved a strong strategy for the Seven Investment Management AAP Adventurous Fund, taking it to 16th in the Investment Association’s Flexible Investment share sector.

Part of the five AAP fund range, the £243m portfolio has returned 35.55 per cent in the past three years, according to data from FE.

While each of the five funds is a highly diversified, actively managed, multi-asset portfolio, using passive instruments enables costs to be significantly lowered, according to 7IM.

The portfolio has a global outlook in its equity allocation, which makes up 79 per cent of its asset allocation, and is not for the risk-averse. The largest equity exposure is in emerging markets, at 24.3 per cent; and Europe, at 24.1 per cent.

Remaining equity holdings are Japan, at 14.9 per cent; the UK, at 10.7 per cent; and the US, at 4.8 per cent.

The active and contrarian approach assumed by the fund management team can be seen also with a 9.7 per cent exposure to private equity, as well as debt and alternatives, at 2 per cent.

The remaining investments are in property, at 5 per cent, spread across the US, Europe and the UK. It has a cash and money markets exposure of 4.5 per cent.

According to its factsheet, the objective of the portfolio it to provide steady, above average returns with lower than average volatility by providing an efficient combination of assets that can deliver superior returns for any level of risk.

Top holdings are the Topix Index Future, at 11.8 per cent; the MSCI All Countries Asia Index Future, at 11.6 per cent; and TOBAM Anti-Benchmark EM Equity Fund, at 5.4 per cent.

The minimum investment is £1,000, and the ongoing charge is 0.64 per cent.

In the same peer group, the L&G Multi-Manager Growth Fund seeks to provide long-term capital growth by investing in a wide range of investment funds, including funds that are not authorised for sale in the UK, that hold company shares.

It may also invest in funds that hold bonds issued by companies, commercial property and cash, according to its factsheet.

The £199m fund has provided a 13.74 per cent return in the past three years, placing it 98th in the sector.

L&G’s asset allocation team, who manage the portfolio, said they invest in both investment grade and sub-investment grade bonds to achieve their goals. It may also have a small direct holding in cash, deposits, bonds and company shares.

However, the fund managers do not invest in derivatives without giving investors notice, although they will select investment funds that invest across all countries, commercial property and cash.

The top three holdings are the Henderson UK Property Oeic, at 6.1 per cent; Novartis AG, at 1.3 per cent; and AstraZeneca, at 1.1 per cent.

The minimum investment is £100 through a nominee, and the ongoing charge is 1.51 per cent, according to FE.

7IM AAP Adventurous L&G MM Growth
Topix Index Future 11.8%Henderson UK Property OEIC 6.1%
MSCI All Countries Asia Index Future 11.6%Novartis AG 1.3%
TOBAM Anti-Benchmark EM Equity 5.4% AstraZeneca 1.1%
FTSE 100 Index Future 5.2%Aviva 1%
Hang Seng China Enterprises Futures 5.1%Novo Nordisk A/S 1%


Rob Morgan, senior analyst with Charles Stanley Direct, said: “7IM has built a strong reputation running multi-manager portfolios, and the 7IM AAP Adventurous Fund has outperformed the IA Flexible sector since launch in 2008 thanks to a strong recovery in relative terms over the past two years. The team apply active asset allocation using mainly passive or smart beta investments, and geographical or sectoral calls can be quite aggressive. For instance, the fund presently has only 5 per cent invested in the US and 11 per cent in the UK. Emerging Markets, Japan and Europe are the major overweights following a very further shift away from the US and UK earlier this year. This means the fund’s performance can deviate significantly from the sector average and go through periods of significant over- or under-performance.

“Asset allocation is determined by longer-term strategic decisions based on risk and return, combined with shorter-term, more tactical decisions to reflect current market views. Given the predominance of passives the OCF for a clean share class is a very reasonable 0.64%, so it could be a consideration for investors requiring a diversified but low-cost adventurous portfolio.

“The L&G Multi-Manager Growth Fund has a similarly team-based approach but invests mainly in active funds. However, to keep charges down it takes positions in individual shares – predominantly large UK or European stocks presently. Even so the charges are relatively high with a 1.5 per cent OCF presently. There is a strong line-up of funds in the portfolio such as BlackRock European Dynamic, First State Asia Pacific Leaders and Invesco Perpetual Income, but performance has been below that of the sector over the past three years, primarily down to lack of exposure to the US. Given that the team has not added value to date overall in terms of asset allocation, it would not be my first choice in the sector, although I cannot argue with the manager selections in the underlying portfolio, which looks very strong.”