Graham Hague is 56 and retired from his job in banking four years ago to care for elderly relatives.
Fortunately, Hague says he has a reasonable pension from his previous employer, as well as his savings and investments. He says: “I worked as a financial adviser for a bank. I have been in the financial services business for 35 years, so investment have always been a part of my life.”
His pension, alongside his wife’s salary, cover day-to-day expenses but spending on holidays, home improvements and “life’s little luxuries” tend to come from the capital they have accumulate in their investments.
Hague, who lives in Kent, says: “My first forays into investments were through regular savings share schemes with my employer. I also bought shares in some of the companies that were privatised during the 1980s.”
When these share schemes matured he tended to diversify these holdings, by investing in other blue-chip shares. Hague says: “I still have holdings in GlaxoSmithKline (GSK) and Lloyds (LLOY) from these days.”
Despite volatility, Hague has seen good returns from both. Glaxo has a four-star rating from Morningstar, while Lloyds has a three-star rating.
However, Hague's more recent share purchases have not proved to be so lucrative. “With my direct investments there has been a number of very poor decisions, most recent examples being RBS (RBS) and Tesco (TSCO). These were purchased when the market was falling and neither have recovered. I am retaining them because they are very small holdings at the moment and won't make a significant difference to my overall strategy.”
Equity Prices Are Stretched
Hague and his wife have concentrated more on fund investments in recent years.
He says: “Around 40% of our total capital is invested at the current time. I do intend to put a little more into the investment arena, but feel that prices at the present time are very stretched.”
However, while Hague does not have all his money in equities, he is prepared to take a bit of risk with this part of his portfolio.
He says: “I am by no means averse to investing in riskier areas. I have a holding in Liontrust Special Situations which has been in place for around four years, and is performing very well.
His wife’s pension is also in a more adventurous fund: M&G Recovery. Hague adds: “Hopefully by taking a more adventurous strategy we will gain some outperformance when compared to more sedentary pension funds.”
Liontrust Special Situations has a five-star rating from Morningstar, reflecting its outperformance against peers in recent years. It also has a Bronze Rating.
Morningstar analyst Samuel Meakin says: “We believe Liontrust Special Situations to be an attractive offering for investors seeking an unconstrained UK equity fund.”
The fund is managed by Anthony Cross, with support from Julian Fosh, each of whom has over 20 years’ industry experience.
M&G Recovery Has Long-Term Merit, say Analysts
The M&G Recovery fund has delivered more patchy returns recently, although Hague has been content with its longer-term performance.
Morningstar analyst Simon Dorricott says: “M&G Recovery still holds long-term merit for investors looking for a multi-cap contrarian approach, despite some poor medium-term performance.”
This poorer performance is reflected in its one-star rating from Morningstar; it does though have a Bronze Rating.
Dorricott says: “The fund’s relative performance has disappointed investors in recent years. That is an unsatisfactory outcome, but over the longer term, since Tom Dobell took charge, the fund remains ahead of the index and is in line with the UK Flex-Cap Equity Morningstar Category.”
Hague invests with Selftrade: “I am keen to obtain value for money and using the Selftrade website enables me to purchase funds without any initial fee.”
However, he is less focused on scrutinising the cost of individual funds. “I don’t take too much notice of the managers’ fees. My philosophy is that the performance figures quoted take this into account and it is the long-term performance strategy and the trading which providers the return.”
Hague has a “top-down” approach to choosing funds. “I am keen to cover attractive areas of the world, but will also follow fund managers with a good track record.”
He researches potential funds via the internet and will also read the financial pages of newspapers and websites: “I always check the Morningstar ratings which were often used in my employment."
Hague Favours Nick Train and Terry Smith
“My most successful holdings of late has been Lindsell Train UK Equity and FundSmith Equity.
“These have all been purchased within the last 18 months, and I like the style of the fund managers. I anticipate that these will be longer term holdings.”
Morningstar shares a similarly positive view. Both are five-star funds, reflecting their strong outperformance in recent years. Both also have a coveted Gold Rating.
Both are managed by highly rated fund managers. Morningstar describes Nick Train, the manager of CF Lindsell Train UK Equity as a “seasoned and talented UK equity manager who has demonstrated a consistent approach.”
Meanwhile Terry Smith, manager and founder of the Fundsmith Equity fund, is described as “an original thinker” who Morningstar says “has often demonstrated his willingness to bet against the crowd”.
Morningstar analyst Peter Brunt says: “This is one of the strongest options for investors seeking exposure to high-quality global equities.”
He adds: “Smith’s investment philosophy is to buy and hold, ideally forever, high-quality businesses that will continually compound in value. High-quality companies are defined as having little need for leverage, an above-average cash return on operating capital employed, and an ability to sustainably grow at this rate of return.”
