Best In Class  

Best in Class: Artemis Monthly Distribution

Best in Class: Artemis Monthly Distribution

From cryptocurrencies to triple-leveraged oil exchange-traded funds (ETFs), the things our clients can invest in seems to grow in number and complexity daily.  

So my Best in Class choice this week is all about simplicity and how you can achieve excellent returns by sticking to just two asset classes.

Designed to provide investors with a regular monthly income (the yield is currently 3.86 per cent), Artemis Monthly Distribution is a global portfolio combining bonds and equities, the ratio between the two asset classes varying to suit prevailing market conditions.

Since its launch on 25 May 2012 it has been top quartile each year and returned 101.52 per cent over the period, making it number one out of 104 funds in the IA Mixed Investments 20-60% Shares sector.

Its average peer has returned 47.56 per cent, according to FE Analytics.

In terms of risk-adjusted returns it is also the best, as shown by having the highest Sharpe ratio in the sector since its launch.

It has been run by the same two excellent stockpickers since its launch in 2012: Jacob de Tusch-Lec manages the equities portion and James Foster the fixed income.

When choosing investments, both managers focus on fundamental analysis of company accounts and how effectively a business uses its cash. 

Mr de Tusch-Lec looks for quality companies with robust financial footings to fund future dividend payments. He can invest in both developed and emerging markets.

To cover this vast universe, he starts with a quantitative screen, initially targeting market capitalisation to find only stocks he can realistically trade in a sensible time frame.

These screens are further used to find companies with the most desirable characteristics, most notably good free cash flows and dividends.

At this point, he returns to fundamental analysis and his stockpicking skills to compile his part of the portfolio.

Mr Foster analyses a company’s ability to pay its debts, looking for those that offer the most value, given the level of risk involved.

He has a contrarian approach here, preferring companies that have taken on a bit too much debt, but are fundamentally sound with good franchises in attractive industries.

So the market may be pricing these companies harshly, but he believes they have the capacity to get themselves out of trouble through diligent turnaround plans.

This stock selection is particularly effective in the high yield space. 

The process from the two managers will generate a portfolio of between 150 and 200 holdings.

While tensions around a possible escalation of trade tariffs are currently making investors nervous, the managers believe that President Donald Trump's tough talk and threats are primarily a political move designed to shore up his support ahead of November’s mid-term elections.

In their words: “His sabre-rattling on trade is a naked appeal to America’s rust belt but, at the same time, he can’t risk a global recession or a crash in the stockmarket, for whose gains he has been so eager to claim credit.”