Investec Cautious Managed - cautious investing in a volatile world

Kate Marshall | Thu 05 November 2015

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The Investec Cautious Managed Fund is a mixed-asset portfolio that aims to deliver attractive long-term returns, but with lower volatility than associated with pure stock market investing. Experienced investor Alastair Mundy, has been at the fund's helm for more than 13 years.

Fund manager's view - at a glance

Alastair Mundy is mindful of a number of risks currently present in the market:

• High valuations - the manager suggests global stock markets are currently highly valued, leaving share prices susceptible to external shocks.
• Debt - global debt levels continue to increase following the 2008 financial crisis. In Alastair Mundy's view, investors seem far less concerned by the fact over-indebted banks have, to an extent, been replaced by over-indebted governments. While low interest rates have made debts easier to service, the implications could become more apparent once interest rates begin to rise.
• Quantitative easing (QE) - in recent years central banks across the globe have participated in extraordinary levels of money printing. QE has traditionally been viewed as an inflationary strategy – this is yet to come to fruition and the ultimate consequence of QE remains uncertain.

Fund positioning

Alastair Mundy has invested in a selection of complementary assets in an effort to insulate the fund from the risks of expensive equity markets, the unintended consequences of quantitative easing and worryingly high levels of government debt. This includes physical gold and gold shares, bonds issued by the Norwegian government, as well as a 'short' position on the US market. As the manager views the US as an overvalued market, the latter position is held in an effort to protect the fund from falling US share prices. Norwegian bonds are held as the manager feels they should provide some shelter from the effects of further QE, as Norway is not printing money.

Performance

Alastair Mundy is a natural contrarian, seeking out areas of the market he believes are unloved and undervalued, which has yielded good long-term returns. Under his stewardship, the fund has returned 134.5%* against 87.2% for the sector average, although past performance should not be seen as a guide to future returns.

Past performance is not a guide to future returns. Source Lipper IM* to 02/11/2015.

The manager's style has not been rewarded over the past couple of years. Larger companies, to which the fund is biased, have underperformed their higher-risk small and medium-sized counterparts, acting as a hindrance. Exposure to the Norweigian krone, as well as gold mining shares, has also recently proven a headwind. Furthermore, the US 'short' position, which has been in place for more than two years, has proven detrimental as US share prices have risen. Please note, the manager has the flexibility to use derivatives which, if used, increase risk.

Our view on this fund

Alastair Mundy is an experienced investor who has delivered good long-term returns for his investors. We like his contrarian investment style, although it means the fund can go through prolonged periods of underperformance, as we have seen over the past few years. Our analysis also suggests that while the fund has tended to outperform its peers in a rising market, it has tended to fall further than its peers in falling markets. The fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.

Please note the fund's charges can be taken from capital which can increase the yield but reduces the potential for capital growth.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.