June 2018
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FE presents its World Cup Starting Fund Line Up

14 June 2018

Inspired by the World Cup, FE’s research team has put together its “dream team” of funds based on the FE Invest Approved List.

With maybe hint to the England team manager Gareth Southgate, they have opted for an attacking 4-3-3 formation, consisting of a goalkeeper, four defenders, 3 midfielders and 3 attackers.

FE based the team on funds from the FE Invest Approved List; a recommended list of funds covering all asset classes and sectors, selected using FE’s suite of ratings and awards, coupled with in-depth qualitative research by its team of analysts.

Below the FE research team lists its ‘players’ and why they have been selected.

Goalkeeper

Blackrock Absolute Return Bond 

  • Just as a goalkeeper’s job is to reduce the risk of conceding a goal, rather than bringing flair to the team, this fund is focussed on risk management rather than idea generation.
  • Investment approach gives flexibility to invest everywhere on bond markets, irrespective of their direction, but also to control and play with the risk.

Defence

M&G Strategic Corporate Bond

  • The job of the defence is to manage the risk of conceding goals. This fund manages risk with minimal allocation to financials and cautious positioning.
  • The manager rotated the portfolio away from government bonds in 2009 and towards corporate debt, driving impressive performance relative to peers.
  • The manager has adapted the fund’s style in order to improve.

Fidelity Moneybuilder Income

  • The ability to play in different formations is key. This bond fund can do just that.
  • Buying bonds in overseas currencies allows the manager to maintain interest-rate risk while limiting exposure to the particular rates in this country.

Allianz Gilt Yield

  • Manager makes good tactical shifts, which add value.
  • Like a defender, the manager is reasonably restricted in how active he can be.
  • The fund produces a return similar to that of the market, with the potential for the addition of a few per cent in added value per year.

Janus Henderson Strategic Bond 

  • Another highly versatile part of the team, the fund invests in UK, European and US debt, but does not take currency risks as a more attacking ‘player’ would.

Midfield

Threadneedle UK Equity Income 

  • This is a ‘box-to-box midfielder’ of funds, going from defence to attack.
  • Defensive because the manager has managed to protect capital in market downturns and attacking because it has done better in rebound years, such as 2013.
  • The best footballers have something different that surprises the opposition. Colwell’s approach to equity income investing is unusual and differentiates this fund from peers.

Franklin UK Managers’ Focus

  • Due to its unusual portfolio construction, the fund has always maintained a 50 per cent allocation to mid and small caps.
  • This helped it achieve outperformance in 2013, 2014 and the first half of 2015. The fund also benefited from its low exposure to the mining and oil sectors.
  • Stock picking has also been a consistent contributor to performance, as it was yet again in 2017.

TB Evenlode Income

  • An experienced player with an excellent record beating both peers and the FTSE All Share benchmark in seven of the last eight years.
  • It also managed to protect investors’ capital, unlike its peers and benchmark.
  • Performance mainly driven by stock picking.

Attack

Baillie Gifford & Co Ltd Global Discovery

  • Much like a change in football tactics, a strategy change in May 2011 helped this fund achieve outperformance of the MSCI World Small Cap Index.
  • Despite a high level of risk, it has consistently beaten the market.

TB Amati UK Smaller Companies

  • Has tended to outperform over the long run, usually being significantly ahead of the index on a three-year basis.
  • Relatively small size means the managers can buy the smallest stocks in their universe that have greater potential for outperformance.
  • They can buy and sell meaningful positions quicker, unlike larger funds, which are forced to become major shareholders in companies if their investment is to be meaningful.

Fidelity Emerging Markets

  • The manager makes unpopular and contrarian calls and runs a portfolio very differently to his peers – the fund is likely to go through periods of significant out- and under-performance.
  • Invests based on consumer demand in emerging markets, particularly in the internet and electronics sectors.

 

 

 

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