As part of our commitment to unearth some of the smaller fund ‘hidden gems’ in the industry Investment Adviser has asked fund selectors to provide their top picks across five different asset classes.
Richard Philbin, chief investment officer, Harwood Multi-Manager:
■ MDO Pareturn Smead Value
Managed from Seattle, this concentrated multi-cap fund invests in unloved value stocks. Turnover is incredibly low and manager Bill Smead has more than 30 years’ experience in the industry. This Luxembourg-listed fund has just passed its second anniversary and at less than $25m (£18m) we believe has the ability to outperform for many years.
■ Matthews Asia Japan
This all-cap fund was launched in April 2015 mirroring an already established US mutual fund. It has a bias towards small and mid-cap firms with a market cap below $5bn. This 60-stock portfolio needs a three- to five-year time horizon to get the best from it.
Category: Absolute Return
■ H20 MultiReturns
Although it is more than £200m and comes with high volatility, this portfolio with a global macro approach provides a yield that is rare in an absolute return product. The performance objective is to achieve 1 Month Libor plus 4 per cent after fees. With a go anywhere mentality it can invest in cash, bonds, and equities.
■ Artemis Pan-European Absolute Return
Now managed solely by Paul Casson, this 18-month-old, £43m fund has delivered 10 per cent over the past 12 months. With an objective to provide positive returns in the long term, this predominantly large-cap fund has the ability to short stocks, thus creating the opportunity to protect when markets are falling.
Category: Fixed Income
■ Legg Mason Brandywine Global Income Optimiser
With roughly 75 holdings, this Dublin-listed fund aims to provide a high yield, while having a strong emphasis on capital preservation. It ideally needs a three- to five-year time horizon. The portfolio will invest across the credit spectrum and is not afraid to hold high levels of cash when market risk dictates.
■ Threadneedle UK Social Bond
This unique fund is not only for the socially conscious, as performance has been admirable. Simon Bond has run the vehicle since launch (December 2013), and with roughly 80 holdings provides a broadly diversified portfolio for a low annual management charge.
■ MFS Meridian Diversified Income
This multi-asset fund is roughly 40 per cent equity and 60 per cent fixed income, and invests across five equally weighted buckets; dividend-paying equity, investment-grade debt, government securities, real estate securities and emerging market debt. A different manager runs each bucket and is overseen by James Swanson, from Boston.
■ LO Funds – Alternative Risk Premia
This Smart Beta fund was launched in summer 2014 and invests across equities, interest rates, credit, currencies and commodities through liquid derivative instruments. It employs long and short strategies to create a fund that is lowly correlated to traditional asset classes.
■ F&C Global Real Estate Securities
Reits and equities tend to be highly correlated in the short term. But over time the characteristics of Reits start to resemble bricks and mortar. Hence, this investment has to be given time to prove its diversifying ‘properties’. This global fund is able to use derivatives to help protect investors and enhance returns.