“To wait before taking action, but be ready to take if it is necessary”.
This is the definition you’ll find if you search the phrase “keeping your powder dry” in the Cambridge Dictionary. The phrase itself dates back to Oliver Cromwell, at the Battle of Edgehill in 1642, when speaking to his Roundhead troops on the opening fight of the English Civil War.
For investors, it is not always easy to wait – particularly when markets become more volatile. Like it or not, Donald Trump is changing the world, as tariffs and his growing brand of aggressive US nationalism ripple across the global economy. Volatility is here to stay; we’ve already seen one major spike in April 2025 (tariffs), with more set to follow.
“The trouble with volatility spikes is they don’t happen in a vacuum, they happen for a reason. So it was perfectly rational in April for people to be selling stocks because there was potential for a global recession.
“The lesson of the past is Trump is really angling for a deal. There are promises of investment into the US from other parts of the world, but nothing concrete, which is a challenge. We tend to think the companies we hold have good business models (solid compounders) who can survive in any environment because they have services people demand. The valuation may move short term but if we can look through those big waves then those companies are the ones we want to invest in.”
That’s the view of BNY Mellon Multi-Asset Balanced co-manager Simon Nichols. The fund is refreshingly simple in nature – it aims to achieve a balance between income and capital growth over a minimum of five years by investing in equities and bonds. There are no complex instruments, making the portfolio very transparent – something which has been reflected in long-term performance, with the fund returning 55.4% over the past decade (vs. 34.5% for the IA Mixed Investment 40-85% sector)*.
The fund typically has around 65-80% invested in global equities, with the remaining allocation usually invested in high-quality government bonds.
Stock selection is determined by four specific factors – global themes (such as clean energy or deglobalisation); company fundamentals; a strong and improving ESG footprint; and valuations. Using the research desk to help evaluate businesses, Simon will typically target larger companies in industries which already have an element of growth behind them – these businesses will normally be exposed to tailwinds in markets. As a result, the fund has historically had an overweight towards sectors like healthcare and technology. However, he will also look at value companies, provided they are not in structural decline.
Simon acknowledges the fund made few changes amid the tariff uncertainty of April 2025, which resulted in a major market drawdown. He believes investors could be made to look “very foolish” by making major changes to a portfolio during a period of significant volatility as things can change quickly.
The fund is up 11.6% in the past 12 months alone. Winners in that time include the likes of industrials, defence and financials stocks**.
Winners and losers
A good example is GE Vernova – which was spun out of General Electric’s energy business in 2024. The business makes gas turbines for power plants. The share price has risen almost 265% in the past year. Simon says this is due to the shortage of power in the US for data centres, given the build out of AI in the world’s largest economy***.
Simon points to a long-held position in BAE Systems, which has benefitted from increased spending on defence by European nations – as well as a basket of financials names like Goldman Sachs, Barclays and Chicago Mercantile Exchange.
Tech has also recovered following a dip, with July’s reporting season reflecting the continued belief in AI.
However, there have been challenges for the healthcare sector, which Simon puts down to US Health Secretary Robert F Kennedy Jr’s policies, tariff overhangs and uncertainty over drug pricing. Examples include life sciences business Danaher, which has not recovered as quickly as hoped following Covid.
Simon says while long-term trends for healthcare, like demographics, are as strong as ever, the overlay has been the affordability. “In a status quo environment these companies should continue to perform well. However, if Trump does shrink the profit pool of these companies that will be a negative. But these companies are not on high multiples – the likes of Glaxo are on single PE multiples – so you are not paying a lot for growth, but there is that overhang,” he adds.
Living up to the balanced name
With almost 73% in equities^, the portfolio looks as balanced as can be. Simon says valuations do not look cheap, however the forecasted earnings, coupled with the discount rate, mean their equity holdings “don’t flash red” in terms of being overvalued. He adds that if corporates deliver the earnings you expect them to, they should compound at reasonable rates.
Fixed income now accounts for around 19% of the portfolio^. Simon says they gently moved away from US treasuries earlier this year in favour of gilts. This was particularly at the longer end (20 years or more) – where yields were attractive at 5% plus. Cash also remains at almost 8%^, something he is looking at more closely as rates continue to fall.
This is a rock-solid global multi-asset vehicle which uses themes to target the forces driving global change in markets. Simon does this by investing in what he calls “future-facing business models” which have the ability to tap into megatrends in their respective industries. It has proven to be a very successful formula during Simon’s tenure on the fund.
*Source: FE Analytics, total returns in pounds sterling, 7 August 2020 to 7 August 2025
**Source: FE Analytics, total returns in pounds sterling, 7 August 2024 to 7 August 2025
***Source: Google Finance, at 7 August 2025
^Source: fund factsheet, 30 June 2025
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Juliet’s views are her own and do not constitute financial advice.
Main image: chris-appano-sTwytNnqWw-unsplash
