HL Multi-Manager Equity & Bond Trust research update
Kate Marshall | Tue 07 July 2015
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David Smith and Lee Gardhouse maintain a simple philosophy in managing the HL Multi-Manager Equity & Bond Trust. They take profits from areas where performance has been strong, rotating the proceeds into areas where performance has been dull, or which they perceive as offering greater value, in the belief they will perform well in future. Provided they can identify experienced, talented fund managers in these areas, they believe this discipline can add significant value over time.
The trust offers the potential for income and growth from investing predominantly in the UK stock market (up to a maximum of 60% of the overall portfolio). The remainder of the trust is focused on bonds and cash in order to provide some shelter against stock market volatility.
A number of UK Equity Income funds form the heart of the trust. While funds such as Artemis Income provide exposure to more traditional, larger dividend-paying companies, the Marlborough Multi-Cap Income and JOHCM UK Equity Income funds provide diversification through their bias towards higher-risk small and medium-sized companies. This segment has performed strongly over the past year, with each UK Equity Income fund outperforming the broader UK stock market.
The CF Woodford Equity Income Fund is the portfolio's largest position at around 15%. David Smith and Lee Gardhouse formerly held exposure to the manager, Neil Woodford, during his tenure at Invesco Perpetual. He set up his own fund management venture last June, at which point they took the opportunity to switch their holdings in the Invesco Perpetual Income and High Income funds into the new fund. This has proven a shrewd move as the CF Woodford Equity Income Fund fund has grown by 16.7% since launch, outperforming both of the Invesco Perpetual funds and the UK's FTSE All Share index, although please remember past performance is not a guide to future returns. Investors in the HL Multi-Manager Equity & Bond Trust benefitted automatically from this change.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| July 10 -
July 11 |
July 11 -
July 12 |
July 12 -
July 13 |
July 13 -
July 14 |
July 14 -
July 15 | |
| CF Woodford Equity Income Fund | N/A | N/A | N/A | N/A | 17.6% |
| FTSE All Share | 29.05% | -2.07% | 18.02% | 12.04% | 3.00% |
Past performance is not a guide to the future. Full year performance figures are unavailable before this date.
While the managers remain positive on the CF Woodford fund's long-term prospects, they do not want it to become an even more dominant part of the portfolio. To maintain diversification, some profits were taken following the strong run.
Some of the proceeds have been used to top up 'total return' funds. These typically aim to provide a modest return with lower volatility overall than stock markets, while also offering an element of shelter during tougher times. This portion accounts for around 20% of the portfolio and includes funds such as Artemis Strategic Assets and Troy Trojan, which have the flexibility to invest in shares, bonds, commodities and currencies.
In the bond element of the portfolio, exposure to corporate bond funds, including Fidelity MoneyBuilder Income and Kames Investment Grade Bond, has been reduced following a strong run for bonds. With bond yields and valuations less attractive than they once were, David Smith and Lee Gardhouse are increasingly cautious in their outlook for the bond markets. As such, they currently favour 'strategic' bond funds, such as Jupiter Strategic Bond, M&G Optimal Income and Invesco Perpetual Tactical Bond, as the managers of these funds have greater flexibility in how they manage their portfolios.
Our view on this fund
Since launch in June 2006, the fund has delivered excellent returns against the IA Mixed Investment 20-60% Shares sector, growing by 55%, with income reinvested, compared with 38.9% for the sector average. Remember, there are no guarantees this will continue. The trust also currently offers a yield of 2.26% (variable and not guaranteed).
Performance since launch
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| July 10 -
July 11 |
July 11 -
July 12 |
July 12 -
July 13 |
June 13 -
July 14 |
July 14 -
July 15 | |
| HL Multi-Manager Equity & Bond Trust | 13.01% | 2.00% | 15.06% | 9.03% | 7.03% |
| IA Mixed Investment 20-60% Shares | 11.00% | -0.08% | 9.09% | 6.06% | 4.06% |
Past performance is not a guide to future returns. Source: Lipper IM* to 01/07/2015
Overall, the trust currently offers exposure to what the managers believe is a quality selection of income-oriented UK equity managers, selected overseas equity portfolios, experienced bond managers in charge of flexible funds and some diversified total return options. In our view, this combination offers the potential to deliver long-term capital and income growth, but with lower volatility than pure exposure to the stock market. Compared to traditional funds, this 'fund of funds' benefits from an extra layer of management meaning our experts decide how to vary the asset allocation within the portfolio. We believe it could therefore make a great core holding for exposure to both equity and bond markets.
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.