Best in class: TB Wise Multi-Asset Growth
I am sure most of you are aware of the benefits of investment trusts, but it is an area I feel has been hugely beneficial to investors looking to add value in the past couple of years.
The backdrop for this view is simple: with markets firmly in the midst of a late-cycle scenario - where many valuations look anything but cheap - these vehicles offer access to sectors which are not available to open-ended funds, such as private equity, infrastructure and renewable energy.
Take private equity as an example.
The sector has grown rapidly in the last decade - at the expense of the quoted sector - and is simply better suited to investment in a closed-ended structure.
This week’s Best in Class has a history of using investment trusts to improve returns.
The TB Wise Multi-Asset Growth fund launched in April 2004 and looks to provide investors with in-line or better returns than equities but with lower volatility.
The fund has traditionally held around 60 per cent in investment trusts, with the remainder in open-ended offerings.
The multi-asset structure gives the fund a wide mandate, both in terms of asset classes it can invest in, (equities, bonds, private equity, property, infrastructure and commodities) as well as no constraints in terms of benchmarks, geography or asset allocation.
The fund is managed by Tony Yarrow, Vincent Ropers and Philip Matthews.
Mr Yarrow started his career as a financial adviser in 1984 and has been managing funds since 1988.
He founded Wise Investment (now Oak Investment Partnership) in 1992 and has managed this fund since launch.
Vincent joined as a co-portfolio manager in 2017.
He previously managed a Tactical Asset Allocation mandate as part of the multi-asset investing team at Standard Life Investments.
Mr Matthews joined the team in September 2018, having previously been a UK equity manager at Jupiter and Schroders.
The team adopts a very slight value bias within its investment process, which starts by building a macroeconomic position and then creating an asset allocation framework from a growth, risk and value perspective.
Essentially, the team believes the most sustainable and repeatable way to outperform is to target leading managers while benefiting from both macro and valuation tailwinds.
The macro views are fed by the team’s meetings with managers (typically between 250-300 per year), with a minimum of two meetings usually taking place with the same manager before a fund is added to their portfolio.
The team accepts that even great fund managers will struggle if their asset class or style faces significant headwinds.
As a result, it uses broad market trends and macro-economic factors in order to finesse its asset allocation.
This includes internal and external research.
Valuations are the overarching filter determining portfolio construction.
Valuations filters are applied at the asset class and individual fund levels to avoid overpaying.
This is the case not only at the entry and exit points, but positions are also actively managed while in the portfolio in order to ensure profits are reallocated to high conviction but underperforming parts of the portfolio.
The TB Wise Multi-Asset Growth fund’s largest position is currently held in the AVI Global Trust (6.7 per cent), which targets capital growth with a focus on shares that stand at a discount to estimated underlying net asset value.
Caledonia Investments (6.1 per cent) and JOHCM UK Equity Income fund (4.8 per cent) complete the top three positions.
The fund is a top quartile performer over three and five years in the Investment Association Flexible Investment sector, returning 31 per cent and 56.2 per cent respectively.
It has an ongoing charges figure of 1.2 per cent.
The focus on high quality funds, coupled with strong exposure to investment trusts, makes this a strong alternative for those investing in the flexible investment sector.
It is a truly diversified option that gives investors access to a wide stream of potential returns.
Darius McDermott is managing director of FundCalibre
