Ken Rayner, investment director at Rayner Spencer Mills, reveals his favourite fund picks from the widely-varied IMA Mixed Investment 40-85% Shares sector.
According to the IMA sector definition, funds in the Mixed Investment 40-85% Shares sector are required to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). See box opposite for the full classification.
Generally, the funds are managed from a global perspective, with most managers holding a core weighting in UK equities and fixed interest.
Managing such portfolios in the past three years has been difficult because of the nature of financial markets and the correlation of both asset classes and sectors.
It’s all in the mix
The position for most managers in this environment has been, until recently, to preserve capital, often in volatile markets, and this has meant holding more cash and fixed interest, with the lowest equity weightings occurring shortly after the financial crisis.
The advantage that the managers have had is in the flexibility of the sector banding which, being reasonably wide, allows for good defensive positions to be taken.
The main premise behind a managed fund is to effectively delegate the overall asset and geographical allocation to a fund manager/fund management group with the expertise to manage it within a structure that does not generate any possible capital gains tax liability to the end investor when changes are made, until the investor sells some or all of their holding.
This allows an adviser to concentrate on the financial planning aspects for their client, including assessing their attitude to risk and capacity for loss, which are key elements in determining which managed fund may be appropriate.
Due to the asset class and geographical spread within most managed funds, they are mainly used as a ‘one-stop-shop’ for clients where the investment amount is considered too small to select a range of investments to cover the same asset classes and geographies.
They may also be used where there is a preference to delegate the asset allocation responsibilities, which may include larger investment amounts.
Another option is to use a managed fund as the core part of a wider portfolio, selecting additional satellite holdings to gain exposure to more specialist asset classes perhaps not included within the managed fund or where an investor has a particularly strong view.
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