The £13bn Vanguard LifeStrategy 60% Equity fund is one of the most popular funds amongst UK savers as its simple, low-cost way of investing has drawn in people searching for a one-stop-shop way to invest.
The giant Vanguard fund invests 60% of its assets into passive equity index trackers and 40% into passive bond index trackers, a mix that has served investors well.
Indeed, over the past decade, it has managed to deliver a total return of 133.1%, outperforming the IA Mixed Investment 40-85% Shares sector’s 109%.
Performance of fund vs sector over the past decade.
Source: FE Analytics
With an ongoing charges figure (OCF) of 0.22%, its low fees and consistent performance have made it the allocation of choice for many UK investors looking for a traditional ‘balanced’ portfolio.
However for those that want an active fund that can either enhance or hedge their portfolio, Trustnet asked market experts which funds they think would sit well alongside the Vanguard LifeStrategy 60% Equity fund.
Premier Miton Global Smaller Companies
Investors that want something truly different, Ben Yearsley, investment consultant at Fairview Investing suggested the Premier Miton Global Smaller Companies fund.
Run by Alan Rowsell, the former manager of ASI Global Smaller Companies fund, Yearsley said he was “a key part” of the small-cap team before he left.
Since its launch in March of this year, the Premier Miton Global Smaller Companies fund is up 12.1% compared to the IA Global average of 9.3%.
Performance of fund vs sector since launch
Source: FE Analytics
There are two reasons why Yearsley suggested a global small-cap exposure. The first was because “it will be very different to a big global index fund and the active share will probably be 100% (or near to it)”.
The second was because “over the long term, small caps offer better growth characteristics than large-cap companies”.
The fund’s largest holding is a 3% position in Crocs, the manufacturer of the iconic foam clogs that has experienced a surge in popularity and sales over the past 18 months. Shares in the company are up more than 10-fold since the lows of the pandemic.
Personal Assets Trust
Laith Khalaf, financial analyst at AJ Bell, said another option was the £1.7bn Personal Assets Trust run by Troy Asset Management’s Sebastian Lyon.
“If you’re invested in Vanguard LifeStrategy 60% Equity, chances are you’re a fairly cautious investor, and so a fund like Personal Assets trust could complement your holding,” Khalaf said.
“Like the Vanguard fund, this trust invests in a core of equities and bonds. Unlike Vanguard LifeStrategy, it’s actively managed with a strong focus on capital preservation.
“It also has a wider toolkit than the Vanguard fund because it can invest in commodities, like gold, as well as property and cash.”
He said this gives the fund manager the ability to potentially “dodge the pain” a traditional bond portfolio might feel from rising interest rates, although the fund also has the flexibility to invest across the bond spectrum.
Khalaf highlighted its high weighting to index-linked bonds which provide a degree of protection from inflation.
He added: “The fund’s relatively low equity weighting of 38% reflects manager Sebastian Lyon’s cautious view of markets.
“So does a 22% holding in cash, which will act as a drag on returns in the long term, but in the short term provides the trust with some dry powder to take advantage of opportunities should markets sell off.”
The fund’s top three positions are in gold bullion (8.3%), Microsoft (5.7%) and Alphabet (5.5%).
Over the past five years, the FE fundinfo five-crown rated trust has delivered a total return of 30.6% compared to 33.5% from the IT Flexible Investment sector average, and 29.5% from the FTSE All Share index.
Performance of fund vs sector over the past five years
Source: FE Analytics
Jupiter Financial Opportunities
Investors concerned about inflation should look to the £613m Jupiter Financial Opportunities fund, according to Darius McDermott, managing director of Chelsea Financial Services.
Over the past five years, Jupiter Financial Opportunities has delivered a total return of 79.5% compared to 54.3% from the MSCI ACWI Financials index and 84.7% from the IA Financials and Financial Innovation sector average.
Performance of fund vs sector over the past five years
Source: FE Analytics
“In the current environment where many are concerned about inflation an obvious solution is a financials fund,” McDermott said.
Financials perform well in a rising interest rate environment as margins automatically increase alongside rate hikes.
McDermott continued: “This leads us to another manager with decades of experience: Guy de Blonay. He has a flexible mandate and has shown skill over many years at finding the best sub-sectors and stocks. A standout fund in this area.”
Some of the largest holdings of the fund include Blackstone Group – one of the biggest private equity firms and alternative investment managers in the world, and Capital One – an American bank specialising in credit cards and auto loans in addition to traditional savings accounts.
