I recently gave you a sneak peek into the investment portfolios of a handful of financial journalists, and I thought it would be interesting to follow up by asking professional fund researchers to anonymously reveal their own personal investments. These guys spend all day researching funds and grilling investment managers (and managing money themselves in some cases), and they are not afraid to ask the tough questions, so we could probably learn a lot by looking at who they trust to run their own money. As usual, please don’t take any of this as an endorsement, you should make your own investment decisions based on what’s right for you.
1 Did you think absolute return funds had died a death? Think again.
Absolute return funds aim to give you ‘absolute’ return, rather than a ‘relative’ return. What this means is that they will always try to make you some money, regardless of whether markets are moving upwards or downwards. So you may get only a small positive return when markets are rising, but they should stop you from losing money when markets are falling. Unfortunately, a lot of AR funds have failed to achieve their objective in recent years, and this has turned the tide of investor opinion against them. However, this fund researcher likes to bang the drum for absolute return funds, so he felt it was only right to put his money where his mouth is.
In his portfolio, he holds Old Mutual Global Equity Absolute Return, managed by Ian Heslop; UBS Dynamic Alpha; and Insight Diversified Target Return.
“I am a believer in absolute return strategies and I have spent a lot of time researching the sector in my day job. I am also deferring to smarter guys than me as to where to be, tactically, through a market cycle,” he says.
I spend a lot of time looking at performance through periods of stress – can they run without breaking an egg?
“These managers have a few scars and have learned from them. The funds take some groundwork to understand, but they are worth the effort in my book.”
Aside from absolute return funds, this researcher also holds a lesser known fund, Sabre Global Value & Income, managed by Ross Hollyman.
2 This researcher also has a fairly concentrated ISA, split equally between three funds: the Scottish Mortgage investment trust, Woodford Equity Income, and Chelverton UK Equity Income. He likes Scottish Mortgage because it offers exposure to high growth, international companies including businesses in specific growth sectors such as healthcare and tech. By contrast, the Chelverton fund gives exposure to small and mid-sized companies and produces a decent income yield. Neil Woodford’s fund invests in large-cap companies with some small businesses at the margin, and also gives diversification from overseas businesses, as the manager normally goes up to his maximum allowed weighting in non-UK stocks.
“I am not looking for an income yet,” he says, “but the income yield puts a floor under the funds – both Woodford and Chelverton can yield more than 4%, so even if things don’t go well, you still have that.”
This researcher is also a fund manager, and also invests in his own fund via his SIPP.
3 This multi-asset fund manager explains that the way he invests for himself is different from the way he runs money for clients, largely because he has a greater appetite for risk. His pension portfolio is split 75% equity, 13% multi-asset, and 12% commercial property. Core holdings include William Littlewood’s Artemis Strategic Assets, hedge fund star Crispin Odey’s Odey Opus, Standard Life Global Smaller Companies, Jupiter Global Emerging Markets, and Fidelity Emerging Markets.
He owns Neptune Japan, which he likes because manager Chris Taylor prefers to hedge out any currency risk, and First State Asia Pacific which has been a strong, core position for the portfolio over the last 10 years. Woodford Equity Income also features in the portfolio. The researcher says: “I am not necessarily an income buyer, but this is a great way of accessing small and unlisted companies.”
He has also opened a small position in J.P Morgan Natural Resources, which has been hit hard by the commodities sell-off, and is drip feeding money in to the fund every month in the hope of an eventual rebound.
4 “Direct equities are on my watch list, but funds are what I know,” says this investor. He has nine funds in his SIPP, of which almost 40% is invested in his own fund, an aggressive growth vehicle.
The next two biggest positions are in Stephen Harker’s GLG Japan CoreAlpha, and Argonaut Absolute Return, a firm favourite which he has recently topped up. Also on the list is Asian Total Return, an investment trust managed by Schroders’ Robin Parbrook. He chose this structure not because he particularly prefers investment trusts, but because Parbrook’s open-ended fund is closed to new money, and because the trust includes Asian smaller companies, so it offers something a bit different to the other fund. “It was basically about finding any way to get access to the manager,” our mystery fund buyer said.
He also holds J.P Morgan Europe Dynamic ex UK, which employs a behavioural finance screen. “I like this fund as it is nuanced and interesting,” the investor says.
Liontrust Special Situations and the BlackRock Frontiers investment trust make up a total of 15% of the portfolio. Holdings in specialist fixed income boutique TwentyFour Asset Management’s Dynamic Bond fund, plus a PowerShares index fund tracking US large-cap equities complete the line-up.
Our investor acknowledged the portfolio is pretty equity heavy and might benefit from being a bit more diversified, with more bonds and property exposure, but as it’s a SIPP which will be invested for a long time to come, taking on more risk seems acceptable.
Just as doctors often don’t look after their own health, fund managers don’t always run their own money as well as they could. So I decided it was better to get my colleague to manage my portfolio for me
This fund selector has chosen a risk profile of 5 (with 6 being the highest) so the portfolio will be taking some reasonably punchy bets.
At 38% of the portfolio, UK equities are decently represented through a selection of funds doing quite different things – Old Mutual UK Dynamic Equity is a long/short fund investing in the FTSE 250, while Ardevora UK Equity is a 150/50 fund, meaning it can take net long positions of 150% of the portfolio and go up to 50% short. Man GLG Undervalued Assets brings a disciplined investment process, and Wood Street Microcap gives access to the very small end of the UK equity market, acting as a good diversifier.
This investor has more property exposure than some of the others, at just under 10%, through the Threadneedle UK Property trust.
Like investor number 4, this mystery fund buyer likes JPM European Dynamic ex UK for his European equity exposure, which makes up 13% of the portfolio. He prefers to hedge out the currency risk because, although he likes Europe, he is less positive on the outlook for the euro.
Another fan of TwentyFour’s Dynamic Bond fund, this manager also holds the Natixis H20 MultiReturns fund for fixed income exposure, which makes up a total 3% of the portfolio.
Around 15% is in US stocks through CF Miton US Opportunities, managed by Hugh Grieves and Nick Ford.
So, there you have a cheeky look into the professionals’ own portfolios. I hope it was enlightening. It’s heartening to see that they are generally eating their own cooking, and are happy to back the funds they support in public with their own money.