Multi-asset funds are very useful investment tools. They allow investors to gain access to recognised investment professionals and to outsource to them a critical decision for their future; that of allocating cash across different asset classes. In practice, however, dynamic asset allocation is a notoriously difficult task for active managers, and few manage to outperform a relevant composite benchmark over the long term.
2014 was no exception to this, as the sudden return of volatility in the second half of the year took many fund managers by surprise, and the majority of them failed to adapt their clients’ portfolio to a less risk-tolerant environment. Funds in the Morningstar GBP Cautious Allocation sector for example returned an average of 3.63%, far behind the 13.1% return of a composite index made of 75% Barclays Euro Aggregate Bond tracker and 25% FTSE World tracker.
One of the highest rated funds by Morningstar analysts in the sector is the Silver Rated Artemis High Income. It managed a return of 4.76% in 2014, and analysts describe it as an attractive offering for long-term investors seeking a high-yielding fund.
“The very experienced lead manager, Adrian Frost, has been at the helm of this fund since Sept 2002 and was joined by comanager Adrian Gosden in Oct 2003. While they are known primarily as equity managers, they have proved themselves adept at running this specialist fixed-income biased fund,” said Morningstar analyst Marianne Weller.
Also highly rated in the sector is IP Monthly Income Plus, the Silver Rated fund returned 4.2% last year. The fund is co-managed by Paul Read, Paul Causer and Ciaran Mallon. Co-heads of fixed income at Invesco Perpetual, Read and Causer are two of the most experienced fixed-income managers in the industry and have worked together at the firm since 1995. When Neil Woodford announced his intention to leave the firm, responsibility for managing the equity part of the fund was passed to Mallon in Oct 2013.
Jupiter Merlin Conservative also sits in this sector. The Bronze Rated fund was launched in 2013 to complete the risk-rated suite of Jupiter Merlin offerings and is considered a topnotch offering for investors seeking an actively managed fund of funds with a growth focus by Morningstar fund analysts.
Finally, completing the list of top-rated multi-asset funds in the Cautious Managed category is the industry juggernaut – M&G Optimal Income. This fund was the most popular of 2014, with recorded sales of £7.2 billion in 12 months – and a beneficiary of money exiting Neil Woodford’s old Invesco funds. The Silver Rated fund is an unconstrained bond fund, with the option to invest up to 20% in equities should the managers wish to. The majority of the fixed income allocation is in BBB rated bonds, at the lower end of the investment-grade bond scale.
