Fund Performance Review

Updated: May 18

The table below sets out our fund performance as well as that of comparators during periods ending 7 December.



In summary, we think investors should be pleased with our fund performance, though the longer term numbers for our growth fund still have room to improve. Readers will recall that it took a little while to align the growth fund with our multi-asset value-investing style, and this was completed in September this year.


There are four things that differentiate all three of our funds.


First, we have a mid-cap focus with UK equities (mid-caps tend to outperform large-caps over time and there is less research coverage so there are more stock picking opportunities).


Second, we do not hold any safe haven bonds (with low or negative real yields they are very expensive).


Third, our funds we think have less foreign exchange exposure than many of our peers (FX exposure adds a lot in the way of volatility but little in the way of return over time, so is not a risk that we believe our investors should be exposed to).


Fourth, around a quarter of each of our funds is invested in what we call ‘specialist assets’, much more than many of our peers (these are generally London-listed investment trusts specialising in areas such as property, asset leasing, infrastructure and direct lending many of which offer high yields with stable, index-linked income streams and thus add something of real value to the portfolios).

We have great confidence in the logic of these positions and believe they will enhance returns over the longer term. The first three of them however worked against us this year (mid-caps underperformed large-caps, sterling fell, and safe haven bonds became even more expensive) and in light of this we are pleased that we kept up to the extent that we did. Over one year, the income fund is ahead of its peer group average, the IA Mixed Investment 20-60% Shares sector. As for the trust, it is also over one year ahead of its more appropriate peer averages, the Flexible Investment sector and the IA Mixed Investment 40-85% Shares sector (formally, the trust sits in the Global Equity Income sector in which it gets compared to pure equity funds). The growth fund had a tricky first quarter, due to some remaining legacy holdings, and so is behind its peer group over one year.


Five year numbers however look excellent for all our funds, particularly when one considers FE Risk Scores of funds and their sectors (for example, our growth fund’s performance is bang in line with its sector average but its FE Risk Score of 58 is much lower than the sector median score of 65.


Finally, I have included the relevant Vanguard LifeStrategy fund as a comparator for each of our funds. The passive option is one that we are very aware our investors have, and we think that the Vanguard funds are probably the most popular of these. Over five years, our investment trust and income fund stack up well against their relevant Vanguard fund, with the growth fund a little behind.


As an investor in the Vanguard funds, I would be very concerned about their high exposure to expensive investment grade bonds in what we think will be an environment of rising inflation and rising real interest rates, as well as the high FX risk (sterling is now cheap on a real effective exchange rate basis and thus may well appreciate rather than continue to depreciate). With our additional competitive edges in relation to mid-caps and specialist assets, we very much look forward to the next five years.

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