Multi-managerJul 18 2016

Fund picks: 100 Club favourites

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Fund picks: 100 Club favourites

With the Investment Adviser 100 Club now in its fifth year, our features team asks a selection of multi-managers and fund selectors for their five favourite 100 Club members of 2016.

Nathan Sweeney, senior investment manager, Architas

■ Chelverton UK Equity Income

This is a differentiated strategy that invests in small and medium-sized companies to derive its income. Managers David Horner and David Taylor look for steady companies with attractive cashflows, yielding at least 4 per cent and with the potential to grow dividends. Often these sorts of companies tend to be overlooked by other UK managers due to their size, or for earnings-based plays. The result is a conservatively managed, well diversified portfolio that is exposed to a range of areas, including commercial property, materials and financials.

■ Crux European Special Situations

Richard Pease’s style of management is currently in favour. A focus on quality companies with strong balance sheets is sensible in this lacklustre market. He builds a portfolio of about 60 companies with superior-quality growth in different sectors. Most of his ideas are identified by the numerous company meetings he has.

■ Fidelity Emerging Markets

This fund is one of our top picks in the emerging market space. Managed by Nick Price, who is an accountant by trade, the fund pursues a bottom-up approach with a strong focus on quality growth. It is a best-ideas portfolio that draws on the research of Fidelity’s regional emerging markets funds and the strong team aims to identify companies with the greatest potential for high and sustainable rates of return (currently primarily in the consumer sectors). The success of their approach is borne out by the fund’s excellent long-term track record.

■ JPMorgan Japan

This is a Japanese equity fund with a mid- and small-cap bias that tries to identify future growth companies with strong pricing power. The fund has a high active share and is looking for long-term winners.

■ L&G UK Property

This is an open-ended, bricks and mortar fund and is a core direct UK commercial property holding with a strong allocation outside London and the South East. At the time of writing, despite the difficulties faced by other funds in the sector, the fund is not currently suspended and has historically never done so, although it has the option to do so if the need arises. It has tended to hold a high proportion in cash and real estate investment trusts (Reits), which has helped it during times of extreme liquidity.

Paul Kim, multi-asset manager, Liontrust

■ Crux European Special Situations

Richard Pease and James Milne, plus a team of analysts, have managed this fund since launch in 2009. They are long-term investors who do not get caught up with short-term noise in the markets. They tend to look for strong companies that are major players in their respective industries, often with high barriers to entry. Their style has worked very well with excellent performance throughout the years.

■ Lindsell Train Japanese Equity

Michael Lindsell took on management of this fund back in 2004 and has consistently outperformed the IA Japan sector average since. Michael is a long-term investor, which is shown by the low turnover of holdings in the fund. The portfolio is concentrated, with fewer than 35 stocks typically held, and favoured companies are usually dominant in their respective fields.

■ Finsbury Growth & Income Trust

Manager Nick Train has built an excellent long-term track record for this trust and the similarly managed UK Equity fund. Nick is very much an advocate of the Warren Buffett School of investing, particularly in looking to buy great companies and hold them “forever”. This was borne out last year when he bought the first new stock in UK Equity for four years. He added Remy Cointreau, bought following the summer market correction.

■ Henderson UK Absolute Return

Managed by Ben Wallace and Luke Newman, this long/short equity fund aims to produce a positive return over the long term, regardless of whether markets rise or fall. They have been successful in this aim for some years now, generally producing a steadily rising return. This fund can be a good counter play against other more volatile holdings, helping to smooth out and diversify returns. The managers invest in large-cap stocks and derivatives, and this combination enables them to produce returns that have a low correlation to equity markets.

■ Old Mutual UK Smaller Companies

Old Mutual has a very well regarded UK small- and mid-cap team that has won numerous awards. Manager Dan Nickols has been running the fund since 2004 with a slight value orientation, but with the flexibility to hold value and growth stocks, depending upon market conditions and their outlook of the future. They conduct their own research and also use external sources for both bottom-up and top-down identification of potential opportunities.

James Clark, fund analyst, Hawksmoor

■ BlackRock Continental European Income

Since launch in 2011, this fund has built up a good track record. Its mandate allows flexibility to rotate through sectors depending on the business cycle and with a very large investment universe it is possible to build a portfolio highly diversified by both geography and sector. Fund managers Alice Gaskell and Andreas Zoellinger have a risk-averse approach to yield generation, seeking to avoid companies whose managements they judge may cut dividends, and purposefully keep the beta of their portfolio below 1.

■ M&G Global Macro Bond

This is the most flexible mandate in M&G’s fixed income stable. Investors gain access to the purest expression of M&G’s high-conviction macroeconomic views. Lead manager Jim Leaviss and his team are able to make money beyond the traditional spheres of fixed income risk (credit and duration) by investing in currencies, taking both long and short positions. The expertise of deputy manager Claudia Calich in emerging market debt means that this asset class can form a substantial part of the portfolio, demonstrating the fund’s all-encompassing approach.

■ M&G Global Macro Bond

This is the most flexible mandate in M&G’s fixed income stable. Investors gain access to the purest expression of M&G’s high-conviction macroeconomic views. Lead manager Jim Leaviss and his team are able to make money beyond the traditional spheres of fixed income risk (credit and duration) by investing in currencies, taking both long and short positions. The expertise of deputy manager Claudia Calich in emerging market debt means that this asset class can form a substantial part of the portfolio, demonstrating the fund’s all-encompassing approach.

■ Henderson UK Absolute Return

Fund managers Luke Newman and Ben Wallace run this long/short UK equity strategy as a replica of their successful hedge fund launched in 2004. The pair are as comfortable in down markets as they are in up markets. The portfolio is unusual in having only around one-third in long-term core positions, both long and single-stock shorts, with around two-thirds in tactical positions. The managers aim to deliver a positive return each year and have carved out a strong record since launch in 2009, including managing to protect capital to a large degree during market pull-backs.

■ Jupiter Absolute Return

Fund manager James Clunie’s particular areas of expertise include short-selling, a discipline in which he gained a PhD and published books. The rare combination of a proven short-term approach to shorting and skills as a long-term equity investor equips Clunie to succeed in the challenge of managing an absolute return fund. Investing in assets including UK and overseas equities, bonds and gold, Clunie can call on the expertise of Jupiter colleagues including Ariel Bezalel (bonds), Ben Whitmore (equities) and Miles Geldard (convertibles and multi-asset).

Richard Philbin, chief investment officer, Wellian Investment Solutions

■ Legg Mason IF Japan Equity

Managed since launch by Hideo Shiozumi from Japan, this £600m concentrated fund has roughly 40 positions. The focus is on growth stocks and is invested predominantly in mid- and small-cap companies. The fund has an excellent long- and short-term track record, but returns can be lumpy. The largest five holdings account for almost 40 per cent of the total assets.

■ Liontrust UK Smaller Companies

Anthony Cross is ably assisted by Julian Fosh on this excellent fund using a process known as the Liontrust Economic Advantage. Anthony has managed the fund since launch in January 1998, and Julian came on board in 2008. With roughly 60 holdings, this fund pays no attention to the FTSE Small Cap (its benchmark) – the proof being it has a very high active share. It is presently highly exposed to the technology sector and roughly three-quarters of the fund is invested in the Alternative Investment Market (AIM).

■ Marlborough Special Situations

With roughly 200 holdings in this fund, Giles Hargreave, the lead manager, and Eustace Santa Barbara have delivered excellent short, medium and longer term performance numbers – especially considering the fund is more than £1bn in size and focuses on smaller cap stocks. Over the past decade, for instance, the fund has returned more than 225 per cent. At present, more than half of the fund is in the industrials and consumer services sectors. The top 10 holdings account for roughly 15 per cent of the portfolio.

■ Jupiter European

Alexander Darwall runs this £3.7bn fund with roughly 40 holdings and performance numbers have been excellent – even accounting for a weak period earlier this year. With a large-cap bias (not surprising considering the size of the fund and the concentrated number of stocks in the portfolio) the fund is diversified across a large number of European countries and industrial sectors. The largest 10 holdings make up a little over 50 per cent of the assets. Small-cap stocks account for less than 1 per cent of the fund.

■ F&C Real Estate Securities

This £100m fund invests in the listed real estate part of the UK and European markets. Managed by Marcus Phayre-Mudge and Alban Lhonneur, this Dublin-listed fund has the ability to short stocks, but is predominantly a long-only vehicle. With a large-cap bias, the fund has the ability to invest in both commercial and residential property stocks. Roughly one-third of the assets are in the UK and the largest holding – a European shopping centre business – accounts for almost 9 per cent of the total assets.