Sheridan Admans, TC Share Centre Multi Manager fund range co-manager, discusses the future for its Fund of Funds portfolio.
10 years on: a significant birthday for the Multi Manager Funds portfolio
A great time to launch?
2008: you could say that we really picked the worst time in our recent financial history to have launched these portfolios! And yet here we are celebrating the success of our three funds, now ten years old, and doing quite nicely, thank you.
The magnitude of the financial crisis in 2008 taught investors and fund managers a few very harsh lessons but spotting or predicting a ‘black swan event’ still remains a near impossible exercise and this is a challenge that we are all likely to have to face again in the future.
Continued volatility anticipated as interest rate rises expected
Levels of volatility have been subdued for some time, since late 2015 in fact, only picking up again in January and February this year, as investors wrestle with the potential for a higher number of rate rises ahead.
February’s pickup in volatility is something that has been missing for some considerable time from markets and we suspect that we are going to have to get used to more of it in 2018.
The challenges ahead are building, putting pressure on investors’ optimism. Protectionism is now getting a significant amount of airtime, inflation and interest rates are likely to start impacting corporate earnings, and consumer spending and monetary stimulus is being slowed or withdrawn.
Can the TC Share Centre Multi Manager portfolio outperform the market this year?
This rise in volatility in 2015 was led by a combination of factors: the Dow and S&P slipped, concerns around falling oil prices and the economic slowdown in China, continued speculation around when the FED would move rates, a broader slowdown in emerging markets and, all the while, European woes rumbled on. Notably in that year, all three of our funds outperformed their respective indexes with the TC Share Centre Multi Manager Cautious ranked first out of 138 fund peers, the TC Share Centre Multi Manager Balanced ranked third out of 134 fund peers and the TC Share Centre Multi Manager Adventurous ranked first out of 141 fund peers.
With expectation that volatility will pick up again this year it is possible the challenge we face could be as significant as 2015. Notably, on a cumulative 1, 3, and 5 year rolling period all three funds, Cautious, Balanced and Adventurous have outperformed their respective Investment Association (IA) benchmarks.
Our preferred regions/sectors and some of our largest holdings
Our preferred regions are presently Japan and European equities. With regard to sectors, we have a preference for Healthcare, Technology and Financials.
Our three largest holdings for the TC Share Centre Multi Manager Cautious fund are LF Woodford Equity Income, LF Miton UK Multi Cap Income and Old Mutual Global Equity Absolute Return Hedged, which have a total combined weight of 28.7%.
Our three largest holdings for the TC Share Centre Multi Manager Balanced fund are Royal London UK Mid-Cap Growth, Legg Mason Japan Equity and Fundsmith Equity, which have a total combined weight of 26.1%.
Our three largest holdings for the TC Share Centre Multi Manager Adventurous fund are Legg Mason Japan Equity, MAN GLG Continental European Growth and Fundsmith Equity, which have a total combined weight of 28.3%.
Balancing cost with value and the rate of return
Our returns are published net of fees and, for long-term investors, on a rolling 3 and 5 year cycle we continue to outperform our respective benchmarks. Although we are conscious of reducing costs we have been proactively reducing these where possible, we also focus on the value and the return we can deliver over costs and, unlike a vast number of investment propositions, providing the fund selected is in one of our designated wrappers, there are no additional costs to be added.
In this context, we regularly assess whether to keep or to remove our fund managers to help us to meet expectations and our decision to change them is based on factors which influence performance as a result of changes to region, sector or asset types.
And for the next 10 years?
10 years is a long time to forecast and I don’t believe many of us in 2008 would have predicted a nine year bull market in equities, Donald Trump moving into the White House and that the measures taken to prevent recession turning into a full on depression would still be operating today. In the context of this, we will continue to hold on to those managers that we believe have a firm focus on the fundamentals, are consistent, and who fulfil their promises.
Please remember past performance is no guide to future performance.