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A defensively-managed, mixed asset fund that aims to deliver an attractive and sustainable income with some capital growth over the long term. The annual yield target is between 4% and 6%. The focus is upon resilient assets and the limitation of downside risk. It is suited to investors seeking a relatively conservative risk/return outcome. Within its sector, the fund features in our 'Income Priority, Globally Diversified Asset Allocation' category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 4. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 4 means the fund’s historic volatility is between 5% and 10%.
The fund’s five-year standard deviation is towards the lower end of the 5-10% range. The fund has a track record of lower volatility and shallower drawdowns compared to many funds in the peer group. By the same token, such a profile is also commensurate with a lower total return outcome than riskier peers. Different share classes could have differing SRRI scores.
The fund is co-managed by John Stopford and Jason Borbora-Sheen. Mr Stopford has worked at Ninety One (formerly Investec Asset Management) for over two decades and has managed a variety of fixed income and multi-asset strategies over that time. He takes ultimate responsibility for asset allocation and security selection, but is supported by the Income Strategy Group, which he also leads. Mr Borbora-Sheen joined the firm in 2015 and has experience in managing multi-asset strategies.
The managers have three key objectives: to generate a defensive return strategy, to deliver an attractive but sustainable level of income and to achieve these goals through a resilient multi-asset portfolio that has bond-like volatility. They argue that a bottom-up approach to generating ideas and building the portfolio is more robust than a classic top-down approach. Categorising investments as either "Growth", "Defensive" or "Uncorrelated", based on their behaviour, is the means by which they seek to avoid what they refer to as naive diversification, where asset types correlate at times of stress.
Selected investments are divided into “Growth”, “Defensive” or “Uncorrelated” assets. During the monthly Global Asset Allocation meeting, the desired skew towards growth or defensive assets is determined following consideration of the prevailing fundamental, valuation and price behaviour backdrop. In summary, for much of a typical the cycle, “Growth” assets are likely to be favoured. As the cycle matures, a more “Uncorrelated” stance is preferred. When the risk of recession rises, “Defensive” positioning is key.
Bottom-up ideas are generated by the seven specialist research groups within the multi-asset team. The ideas are appraised using the "Compelling Forces" framework (which assesses fundamentals, valuation and market price behaviour) in regular team meetings, where existing ideas are reviewed and new ideas discussed. Any investment under consideration must contribute to the fund's yield, display resilience in terms of a sustainable income and offer the prospect for capital growth. Equity selection favours companies with sustainable dividends, stable cashflows and strong balance sheets. Fixed income and currency selection is based upon outright and relative value opportunities, which are cross-checked with proprietary fair value models. Credit selection favours companies with strong cashflow generation, sustainable capital structures and good earnings visibility to ensure the company can service its debt. Emerging market debt is included opportunistically when it is deemed inexpensive, while property and infrastructure investments emphasise the sustainability and transparency of cashflows.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
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