Balanced Managed Sector Needs More Balance
The funds in this peer group haven't done as much to protect investor assets as one might think. Plus, two picks to consider.
If we take two truly balanced strategies and compare them to the sector, a different picture emerges. A composite index made up of 50% MSCI World and 50% Lehman Sterling Aggregate Bond would have lost 5.2% in the above-referenced period. If we replace MSCI World with the All Share in the composite, the loss still would have been a comparatively mild 10.2%. Although they would have failed to compete strongly in up markets, both strategies would have performed in the top quintile of the sector over the period, suggesting at the very least that most managers in the group failed to move to protect assets in the downturn.
Within this group, it won't be surprising that we think Jupiter Merlin Balanced is one of the better options going. John Chatfeild Roberts and his team have done a nice job of participating in up markets whilst limiting the fund's downside. The fund is down just 10.9% over the past year, compared to a 16.5% loss for its average sector peer. At last count, it was roughly 56% cash and fixed interest, with the remainder in equities. It can and has been more aggressive--but when it counts, the team have made the right decisions. As with most unfettered funds of funds, you are paying a premium for the privilege, but at least here you're getting experienced managers with proven expertise for your money.
For those not interested in paying up for a fund of funds, we also think Newton Balanced merits serious consideration. It has been heavily equity oriented at various times, but we continue to think highly of Newton's global analyst staff and their thematic approach to investing. That group made two big calls that have paid off dramatically across Newton's fund range in the past two years--cutting financials exposure, and increasing the emphasis on large caps. This fund already had a large-cap emphasis, so it benefited less from the latter, but the move away from financials helped it considerably--indeed, it lost just 5.8% from 1 July 2007 through 30 September 2008. The fund has not always been a standout, but we think Newton's research and sensible approach both argue in its favour over the long term.
A version of this article previously appeared in Investment Adviser, Financial Times Ltd.
