Picking a fund in which to invest this Isa season seems to be more difficult than ever.
Despite experiencing quite a considerable correction since February, many equity markets are still not looking great value and bonds are on a sticky wicket as interest rates seem set to rise further in both the US and the UK.
Add to this the US/China trade wars, Russian spy probes and Brexit negotiations, and it's difficult to have much conviction.
Markets will, quite possibly, remain more volatile in 2018, so perhaps rather than trying to pick the year's winner we may be better off focusing on adding some 'glue' to bind client portfolios together.
Church House Tenax Absolute Return Strategies started life as an investment for a private client, before the managers, James Mahon and Jeremy Wharton, made it more widely available.
It's a multi-asset fund that invests directly in assets – fixed interest, equities, property, alternatives and cash – rather than using the fund-of-funds route, and it sits in the much maligned IA Targeted Absolute Return sector.
While I recognise there are a number of peers that haven't lived up to their billing, this fund has.
Positive returns have been achieved in 97 per cent of rolling 12-month periods over the past five years, with an average return of 5.1 per cent per annum and having lower volatility, lower maximum drawdown and lower downside risk than 84 per cent of its peers, according to Church House Investment Management, as at 28 March 2018.
Unlike other many other funds in the sector it doesn't have a performance fee and it doesn't short stocks. Instead, the fund targets an absolute return from diversification and risk management alone.
The managers look for low correlation of returns between assets where possible, and low volatility in the fund’s overall exposure.
One of the main drivers of the investment process is the attention given to interest rates, especially rate spreads.
The managers' bottom-up process will look at timing, curve positioning, duration management, capital structure and covenants. The managers then seek to gain the appropriate exposure across a broad range of asset classes.
Avoiding loss is fundamental to their strategy and they are prepared to hold high proportions in cash and other lower-risk assets in pursuit of the fund’s objective.
In recent months, this has meant around a 30 per cent allocation to floating rate notes (FRN).
Essentially, these are bonds with variable yields; the level of income they pay out is tied to a benchmark, often the base interest rate or Libor.
This allocation rose to 35 per cent in January – the greatest proportion they have held.
With extra cash from fund flows and four sterling FRNs (issued by Toronto Dominion, CIBC, Lloyds Bank and The Commonwealth Bank of Australia) that matured, along with a US dollar issue from JP Morgan and a short-dated EIB bond, they rebuilt the book – acquiring some new positions and adding to existing ones.