As The Great British Bake Off returns, we take a look at the similarities we can draw between cakes and investments.
Seeing funds in cakes
The Great British Bake Off is back on Channel 4 on 27 August! The show is my guilty pleasure, I have to admit, as cakes are my undeniable weakness. I enjoy the sight of perfectly baked and decorated cakes, preferably with oozing chocolate ganache, as I walk by the windows of patisseries. With my feet unconsciously moving towards the counter I clearly do not have the willpower to resist the attraction. Interestingly, as an investment analyst I do find that cakes have many similarities with investment funds.
Victoria Sponge – the all-time classic
Topped with lemon syrup, it is a Lemon Drizzle Cake. Inserting whipped cream and strawberry jam, it becomes a Strawberry & Cream Sandwich Cake. Adding cocoa powder into the batter, it is a Chocolate Sponge. In investment terms, this bears the characteristic of a core investment and a base for one’s investment portfolio. The CFP SDL UK Buffettology Fund in my view is the classically British Victoria Sponge. The fund seeks to deliver a return superior to the performance of the UK stock market over the long term by principally investing in UK equities with strong operating franchises and experienced management teams, applying the methodology of Business Perspective Investing.
Microwave Mug Cake – high power blasting
A simple mixture of a few ingredients, this is one DIY cake that can satisfy one’s craving in a few minutes. It is all down to the high power of microwaves, and reminds me of Nomura Global High Conviction Fund which is an actively managed and highly concentrated portfolio of global equities and backed by its managers’ academic research and investment thesis that successful portfolio diversification can be achieved with around 20 stocks (a smaller number than typically found in funds). The fund invests in quality companies trading at a discount to intrinsic value, aiming to achieve long-term capital growth.
Yuzu – a flavour of Japan
In last season’s Bake Off, baker Kim-Joy was a fan of yuzu flavour. Yuzu is a Japanese citrus fruit and has a unique fragrance that sets it apart from lemons and oranges. Thanks to its splendid aroma, yuzu has a particularly long and illustrious history in fine Japanese cuisine. A fund with yuzu flavour is Legg Mason IF Japan Equity. Managed by Hideo Shiozumi, it seeks to benefit from the economic and structural changes that Japan faces. Whether that is through the ongoing and rapid emergence of the internet as a sales channel or the opportunities created by the ageing population in medical and long-term care industries needed to help support the nation.
Seasonal and local ingredients – showing off flexibility, knowledges and skills
Using seasonal and local ingredients is always preferred by many contestants in Bake Off; a way of showing off the flexibility and knowledge of ingredients and skills required when deviating from recipes. JPM Global Macro Opportunities Fund utilises its experienced, resourceful and skilled macro managers and strategists to determine the fund’s relevant macro themes and take advantage of the mispricing of macroeconomic trends by using a focused and flexible approach. Supported by a fully integrated and proprietary analytical system, the fund has the potential to deliver positive returns in varying market environments with limited volatility in medium term.
Golden flakes decor – a tiny necessity
It is such a necessity to add some golden flakes on top of Petits Fours, a tint which compliments their sophisticated appearance. As a result of the concerns over the weakening of the global economy, escalation of trade tensions and geopolitical unease, we have seen the price of gold (the ultimate safe heaven) rising in recent months. Merian Gold & Silver Fund targets positive returns versus Spot Gold movements and has a low correlation to global equity/fixed interest instruments. The portfolio consists of gold and silver bullion, as well as gold and silver mining shares with the allocation changing dependent on where the manager and team see the prevailing market conditions.
No matter how fascinated I am with cakes, I don’t bake often. Only now and then I let my hands delve into a flour and butter mixture, just for fun, because I know my limitations. My local patisseries have the skills and provide the convenience to satisfy my cravings. Ok, enough talking about cakes, I’m heading off to my local bakery…
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