In his new regular column, Martyn Ingram of The Investors Partnership provides an independent view on product fund links offered by Cazenove
A lot can change over three years, but one thing that hasn't, until now, is that The Investors Partnership has presented a regular Model Portfolio Construction article in MultiManager magazine. This month, I present the first of a series of new articles for Real Adviser providing an independent view on product fund links that are covered elsewhere within the magazine.
Some regular readers have been using the Model Portfolio Construction articles as a source of ideas for possible fund selection. I feel that it would be wrong to leave these readers high and dry; therefore, for any intermediaries who are interested, I'm offering some free fund consultancy advice. This is based on the three multimanager portfolios, so, if you'd like to know more, please email me at [email protected]
The pros and cons
So let's get started with this month's fund links article, which provides comment on five Cazenove fund links that are available via Scottish Equitable's Flexible Pension.
For intermediaries, there are both positives and negatives to consider when using external fund links. One negative is that a fund's charges may appear to be excessive when compared to the alternatives. Personally, I believe that better investment performance potential is something worth paying for, and that a good starting point is to examine the added value that investment in a particular fund might offer.
Added value can be measured in a variety of ways, and one of these is the scope for outperformance relative to competitor funds. Below I rank the five Cazenove funds in terms of their outperformance potential within their peer groups.
Top of my list is Cazenove UK Dynamic, managed by Neil Pegrum. The fund invests in 25 to 40 stocks and is unconstrained by an index, two features that I regard as being rather attractive at this time. Neal Pegrum is a stock-picker who, prior to joining Cazenove, had success with a similar fund that he managed for Insight. With this Cazenove fund you are very much relying on the skill set of the fund manager. You should not expect Neil's investment style to work all of the time, and I would be against putting too much of a client's investment into the fund at any one time. Before your client makes their first investment, learn more about how Neil Pegrum's investment strategy differs from that of managers who are responsible for more pedestrian-performing funds.
Next on my list is Cazenove UK Growth & Income, managed by Tim Russell, but don't expect much outperformance from this one relative to the FTSE All-Share. Also note that when Cazenove UK Equity Absolute Return, a hedge fund managed by Tim Russell, was launched in 2003, the Cazenove UK Growth & Income's performance suffered for a period relative to other funds in its peer group. This said, managers with experience in hedge fund management can bring some valuable expertise to the management of long-only funds such as Cazenove UK Growth & Income.
The remaining funds are Cazenove UK Opportunities, Cazenove European and Cazenove UK Corporate Bond, which, by my personal preference, I rank third, fourth and fifth respectively.
Cazenove UK Opportunities is managed by Julie Dean, who worked with Tim Russell at HSBC prior to joining Cazenove. For me, the fund should be targeting stronger performance returns. Rather than invest in this fund, I would prefer to invest in a blend of Cazenove UK Dynamic and Cazenove UK Growth & Income.
Next is Cazenove European, which is managed by Chris Rice. Over the last two years, this fund has produced higher returns than the other four Cazenove funds. However, I would encourage investors to considerably underweight exposure to Europe at the moment.
More aggressive approach
If you have customers who particularly want exposure to the region, I would suggest that they select a fund that is managed using a more aggressive stock-picking approach.
Last on the list is Cazenove UK Corporate Bond. It is the worst performer of the five funds over the last two years, which is not a surprise as equity funds have outperformed fixed income funds generally. To me, Cazenove UK Corporate Bond is not special, and it is not invested in a particularly attractive part of the bond market. If you have clients who specifically want exposure to bonds, look through the range of other external fund links on offer via the Scottish Equitable Flexible Pension - you might find something that suits your clients better.
Cautious, Balanced & Dynamic Growth
Cowardly, boring or sensible
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