Every month, we will bring you a fund of the month to help you better manage your investments. Here Richard Taylor, a chartered financial planner for PIC Middle East, who also runs UKTaxDubai.com, reveals his choice for July:
CF Miton Special Situations Portfolio, a managed fund, has long been a favourite of mine, especially for those investing in British pounds. Before I go into more detail though, I must explain the distinction between a managed fund and a standard mutual fund (or Unit Trust for the British).
A mutual fund is usually focused on one particular asset class in one particular geographical location – for example American Equities – and it is the job of the investor and/or adviser to build and manage a diversified portfolio of several mutual funds focused on different things.
A managed fund, on the other hand, is one mutual fund where the fund manager is not focused on one asset class and location, but instead manages the assets of the fund across all asset classes and geographical locations. It is the highly trained, educated and resourced fund manager who decides, within a specified risk boundary, what to be invested in. It is effectively a full portfolio within one wrapper.
As Miton themselves put it: “The CF Miton Special Situation Portfolio is a global macro, multi asset fund investing across the major asset classes as well as providing specialist exposure to investment trusts, direct equities, ETFs and structured products”
Now, not all managed funds were born equal and this is one of the best. I would expect many to have heard of this relatively small fund (£866m under management) which has, over the last 10 years, significantly outperformed its peers - 187 per cent versus a sector average of 100 per cent, while rarely growing by as much as its peers in the good years. And that is exactly where this fund makes it mark - by not losing money when others do.
This may sound like a strange comment to make but most managed funds track their sector average and its ups and downs, they just do it to a lesser or greater extent. CF Miton Special Situations Portfolio doesn’t do this - in the good times it goes up and in the bad times it goes up, which when you think about it, is exactly what you want. Would you rather a fund that goes up by 30 per cent in a good year only to fall back 30 per cent the next year? Or a fund that goes up by 10 per cent in the good year but still goes up by 5 per cent the following year? It’s a no brainer – managing money over the long term is more about protecting the downside than most realise, although it makes perfect sense as soon as you give it any thought.
Probably the main reason for this performance is the careful, contrarian, award-winning management of the lead fund manager Martin Gray who, in 2008, was rated as one of its top 10 fund managers of the decade by The Telegraph. This is a man not afraid to sit tight in cash (currently nearly 30 per cent), which is almost sacrilegious in the world of fund management
This is a superb fund for investors, who don’t have the time or inclination to manage a full portfolio themselves, looking for medium-to-low-risk, safe, diversified investment with a stellar track record. One word of caution – this fund is in GPB denominated and other share classes aren’t hedged, meaning if you invest in US dollars you are exposed to FX movements in GBP:USD, good or bad.