Thesis outperforms sector with UK gilts

Investing a large portion of the portfolio in UK gilts has worked out well for the Thesis Spectrum Orange Fund, which is ranked highly against other multi-manager funds in its sector.

Over the past three years, the £31m fund has returned 26.2 per cent, according to FE data. This stands as an impressive figure against the IA Flexible Investment sector average of 8.4 per cent.

According to the fund’s latest factsheet, the management team has increased its exposure to government bonds signficantly since September last year, trimming down its investments in equities, while maintaining its holdings in exchange-traded funds.

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Despite a difficult month for markets during September, the fund has been de-risking by increasing short-term gilt allocations over the past few months.

A fifth of the portfolio is in DB X-Trackers FTSE 100 Short ETF, 18 per cent is in iShares Index Linked Gilt ETF, and 16 per cent is in both SSG SPDR Barclays 15+ Year Gilt ETF and iShares UK Gilts 0-5 Year ETF.

The fund has not consistently outperformed the peer group, however, with the sector performing better on average throughout 2014.

According to the factsheet, the fund will remain cautious and wait for new trends to emerge. Most notably, it plans to reduce its exposure to UK gilts if prices come under pressure again.

The minimum investment in the fund is £5,000 and the ongoing charge is 1.2 per cent.

By comparison, the Margetts Sentinel Enterprise Portfolio, which sits in the same sector, has dropped well below the sector average, falling to -3.2 per cent since 2013, the latest FE data reveals.

The £49.8m fund has 36 per cent of the portfolio invested in Asia Pacific, a quarter is exposed to emerging markets and 12 per cent is in Europe.

The remainder is divided between specialist funds, stock and shares, equity income and the US.

According to the fund’s latest factsheet, the fund invests primarily in a diversified range of collective investment schemes to achieve long-term capital growth.

The portfolio manager has shown a preference for funds with exposure to fast-growing economies, such as Asia and emerging markets.

The largest holding in one fund is PFS Somerset Emerging Market Dividend at 6.8 per cent, with First State Global Emerging Markets and MGTS Ardevora UK Income Instl coming in second and third positions at 6.75 per cent and 6.62 per cent respectively.

The minimum investment is £1,000 and the ongoing charge is 2.23 per cent.

Thesis iFunds Spectrum OrangeMargetts Sentinel Enterprise Portfolio
1. db x-trackers FTSE 100 Short ETF 20%1. PFS Somerset Emerg Mkts Div Gr A 6.81%
2. iShares Index Linked Gilt ETF 18%2. First State Global Emerg Mkts Ldrs B 6.75%
3. SSG SPDR Barclays 15+ Year Gilt ETF 16%3. MGTS Ardevora UK Income Instl 6.62%
4. iShares UK Gilts 0-5 Year ETF 16%4. Threadneedle Global EM Eq ZNA 6.49%
5. iShares Core UK Gilts 11%5. Fidelity Emerging Markets W Acc 6.42%

Adviser says...

Ben Willis, head of research at Bristol-based Whitechurch Financial Consultants, said: “The Thesis iFunds Spectrum Orange fund sits within the IA Flexible Sector, so you are effectively backing the incumbent management team’s expertise when investing in these types of funds.