Mika Kubunavu has made some radical alterations to his investment portfolio in the last couple of years, prompted by Brexit and the under-performance of a number of funds.
Kubunavu, who lives in London with his wife and two children, says: “Just before the EU Referendum we de-risked our portfolio. But with hindsight I wish we hadn’t done that now. Who knew the stock market would recover so quickly and continue to do well for so long?
“Over the past year we have been trying to re-inject a bit more risk back into our ISA and pension portfolios.”
Kubunavu has ditched a number of holdings, including Threadneedle Dollar Bond, BlackRock Gold & General, JPM Natural Resources and Woodford Equity Income.
Although many of these funds - and the managers running them - have good long-term track records, Kubunavu says these funds had not performed particularly well during the period he has been invested.
He is instead switching his investments away from bonds and commodities, such as gold, to capitalise on rising equity markets.
He says: “Woodford Equity Income disappointed which is why we sold. We also sold JPM Natural Resources as commodities just don’t seem to be doing very well at all at present.”
JPM Natural Resources has a two-star rating from Morningstar, reflecting its underperformance against peers. It does have a Bronze Rating though. Morningstar says this fund is a “worthy option for investors, provided they understand its risks and distinct features”.
Between February 2012 – when the current manager took charge – and April 2018, the fund has produced annualised losses of 7.5%. This compares with an annualised loss of 4.5% in the sector.
Morningstar analyst Fatima Khizou says: “It’s worth noting that this period included some of the most challenging times for mining and gold equities.
“The fund lost far more than its typical peer during those periods in part because of its small/mid cap bias, though this feature is less pronounced that it was historically.”
Khizou adds: “The 2016-17 period shows that the team is able to add value through stock-picking and that the strategy can provide investors with a solid showing in more positive environments for commodities.”
Higher Risk Options
In a bid to increase returns Kubunavu has invested in higher risk options. This includes Goldman Sachs India Equity Portfolio, and, more recently, a couple of UK funds focused on mid- and smaller-cap companies.
Kubunavu says: “When the UK stock market fell back in February we took this as an opportunity to add to our UK holdings.”
This included investments in the four-star rated F&C UK Mid Cap and five-star rated LF Livingbridge UK Micro Cap Growth fund.
When it comes to investing, costs are important to Kubunavu, but he is not a fan of cheap trackers. “We’d rather pay a little more and beat the market. It also makes investing a bit more interesting.”
The couple invest their ISA and his wife’s SIPP through Chelsea Financial Services. They look at the fund recommendations the company makes but also investigate their own fund choices.
Kubunavu adds: “My pension is one of the few defined benefit pensions left, so this gives a bit of additional security.”
ISAs and Pensions for the Children
The couple split their money between ISAs and pensions. And they have also taken out both a pension and a Junior ISA for each of their children, now aged three and seven.
Kubunavu adds: “We’ve recently put a small lump sum into the children’s pensions. We are hoping that the power of compounding over the years will do the rest. It’s a 50-year plus time horizon after all.”
The couple invest around £75 a month into Junior ISAs which they hope will be used for either university costs or a deposit for their first home. He adds: “If some of it went on inter-railing or some backpacking adventure we wouldn’t worry too much. Both myself and my wife have travelled a lot so it’s probably in the blood!”
Despite these recent changes, the couple say they typically prefer a buy and hold approach; both the children’s JISAs have been in Rathbone Global Opportunities since the outset. “This fund has done really well and we have been very pleased with it.
This fund has a five-star rating from Morningstar reflecting its strong performance in recent years against peers, and has a Silver Analyst Rating.
Morningstar analyst Peter Brunt says: “We continue to consider this fund a great option for investors seeking a global equity fund with a high-growth, all-cap profile.”
Manager James Thomson has been involved in the fund since its launch back in 2001 and Brunt says Morningstar has “a high regard for his stock-picking abilities”.
It is not just the global funds that have performed well recently.
“We’ve swapped and changed our ISA and pension a bit more than usual in the past couple of years. Usually we stick with funds for a good few years, adding more than subtracting when we see something new that we like.” Kubunavu says.
"Hopefully Brexit, when it happens, won’t throw them off course too much."
