Ron Patel, 29, describes himself as a “high risk” investor – who’s not afraid to invest in more volatile sectors .
He says: “These are longer term savings, that will in the main be for my retirement. I can afford to take a longer-term view and take a few risks along the way.”
Patel – who lives in West London - said he started investing three years ago, initially on the advice of his father, whom he describes as an “avid investor”. At the time Patel says he was working for Transport for London, and had just bought his first home. “I started saving monthly to help build up some savings for retirement.”
He splits his monthly savings between a range of funds. These include Baillie Gifford Global Discovery, Aberdeen Latin America and Unicorn Smaller Companies.
This Baillie Gifford funds invest in smaller cap companies worldwide. It has a three-star rating from Morningstar, demonstrating it has successfully outperformed its benchmark.
The Aberdeen Latin American Fund is a Bronze-Rated fund, reflecting Morningstar’s confidence that it will continue to outperform peers. Lena Tsymbaluk, an analyst at Morningstar says: “The fund remains a compelling choice within its sector, managed by a team we regard highly.” This team, headed by Devan Kallo, utilises analysis from Aberdeen’s 18-strong global emerging market team.
The Unicorn fund is more focused on the UK smaller company market. It has a four-star rating from Morningstar.
Making the Most of Tax-Efficient Savings
Patel says he makes the most of tax-efficient savings wrappers, and uses both ISAs and SIPPs, which he manages through Chelsea Financial Services. “I’ve found their service easy to use,” he says.
But this more gung-ho approach doesn’t mean that Patel isn’t worried about investment returns over the medium term – particularly after the economic shockwaves caused by Brexit and the election of President Trump.
He says: “These events have made me hold back a bit from the more aggressive investments I hold. I’ve rebalanced my portfolio slightly as I think 2017 might be a more volatile year. We’re not quite sure what will happen in the US, and with elections in a number of European countries, we could be in for a bumpy ride. “
Although he stills holds these higher-risk funds he’s made a few more cautious investments, with a view to preserving capital. To this end, Patel has invested some of his portfolio in SVS Church House Tenax Absolute Return Strategies fund.
Like other absolute return fund, this investment aims to achieve positive returns across different market conditions. The fund is managed by Jeremy Wharton and James Mahon, and has a three-star rating from Morningstar. It aims to achieve positive returns across rolling 12 month periods, which -- according to Patel -- it has done in recent years. Morningstar data shows it has produced annual returns of 3.99% over three years, and 5.01% over five years.
‘I’d Rather Make a Little, Than Lose a Lot’
However, given the strong stock market surge in the latter half of last year, this fund has lagged behind its benchmark. Absolute return funds aim to deliver positive returns across different market cycles, but their more cautious approach means that they often underperform in bull markets.
Patel says he is happy with this. “In the current conditions I’d rather make a little, than lose a lot. I have other funds that are quite volatile so it made sense to have a more cautiously managed fund alongside this which will hopefully grow slowly and steadily.”
Similarly, rather than investing solely in smaller companies and emerging markets, Patel says he’s also invested in Brown Advisory US Flexible Equity Fund, which invests in US mid and large cap companies.
Sparking Returns From Gold Fund
Elsewhere Patel says he also made an investment in gold last year – via BlackRock’s Gold & General Fund. He says: “This was another tip from my Dad. We’d been looking at the gold price and last January (January 2016) we thought it was close to bottoming out. It had certainly been in a trough so it seemed a good time to invest.”
This proved to be a judicious move, as this fund made strong gains during 2016 on the back of a rally in commodity prices. According to Morningstar BlackRock Gold & General was up 78.7% during 2016.
The fund has a coveted Gold rating from Morningstar. Fatima Khizou, an analyst at Morningstar, says: “This fund remains a strong offering for investors seeking mainstream gold and precious-metals equity exposure in a risk-controlled manner.”
The fund is managed by Evy Hambro. Khizou adds: “Performance has been strong, with returns substantially ahead of the FTSE Gold Mines Index. In addition the fund is not overly expensive.” She points out that while the fund remains one of the largest in the sector, the assets under management have fallen from £4 billion in 2012 to just under £1 billion (as of Feb 2016).
However, despite strong gains last year, Patel says he appreciates that this to can be a volatile area to invest in. In 2013, for example the fund lost almost 50% in value, with a further 20% loss during 2015.
But he adds: “Given all the uncertainly in the world at present it doesn’t seem a bad idea to have a stake in this safe haven asset. I’ll be keeping this investment in my portfolio for now.”
