Very cautious outlook
The Skandia model recommends that more cautious investors have around 41 per cent in cash or money market funds.
GLG Cash, Fidelity Moneybuilder Income and Henderson Cash are the best-performing funds in their sector over a decade, returning just over 10 per cent, and at very low risk.
The model also suggests these cautious investors have 28 per cent in UK fixed income.
"Fidelity Moneybuilder Income and M&G Corporate Bond are the fixed income funds we would use for a cautious investor," AWD Chase de Vere’s Patrick Connolly said.
Performance of funds vs sector over 10-yrs
Source: FE Analytics
The funds have both trounced their sector average over a decade, and at a lower volatility, our data shows.
Property should make up 15 per cent of a cautious investor's portfolio – excluding their own home – according to the model. Property funds have been volatile over the past decade, with only one fund – Royal London Property – consistently giving positive returns.
The £208m vehicle, run by Stephen Elliott, invests directly into property, and has more than 60 per cent in the UK.
Suggested asset class weighting for three types of investor
| Asset class |
Suggested weighting (%) for a cautious investor |
Suggested weighting (%) for a medium-risk investor |
Suggested weighting (%) for a high-risk investor |
| Cash/money markets |
41 |
0 |
0 |
| UK fixed income |
28 |
36 |
0 |
| International fixed income |
0 |
0 |
0 |
| Property |
15 |
15 |
3 |
| UK equity |
2 |
9 |
0 |
| North America |
3 |
8 | 18 |
| Europe |
3 |
8 |
19 |
| Japan |
2 |
6 |
15 |
| Far East ex Japan |
2 |
6 |
15 |
| Emerging markets |
2 |
6 |
15 |
| Global specialist |
2 |
6 |
15 |
Source: Skandia
Mid-level risk outlook
Investors with a moderately cautious outlook should also have a high weighting to UK fixed income and to property, Skandia recommends, but they should also have a higher weighting to UK equity, North America and Europe.
UK equity funds are prolific in the IMA universe. The £6bn M&G Recovery fund is among the highest regarded of these, but MFM Slater Growth and Liontrust Special Situations shouldn't be overlooked.
Performance of funds over 5-yrs
Source: FE Analytics
While the funds don’t have the track-record of M&G Recovery, they have outperformed over one, three and five years.
High-risk outlook
Higher-risk investors should split their investments between Japan, the Far East, emerging markets and specialist global funds, the Skandia model recommends, as well as among the US and Europe.
Performance of funds vs sector over 10-yrs
Source: FE Analytics
GLG Japan Core Alpha is among the most consistently performing Japan-focused funds. Managed by FE Alpha Manager Stephen Harker and Neil Edwards, the £1bn fund has returned 44 per cent over the past decade, and 16 per cent over the past three years.
By contrast, the average fund in the sector has lost 1.4 per cent over a decade, and returned 4.4 per cent over three years. Another consistently high-performing fund in the sector is Schroder Japan Alpha Plus.
Performance of funds over 5-yrs
Source: FE Analytics
Investors are restricted in how they can gain exposure to the Far East, as just six funds in the IMA universe are focused on the region. The best performing over a five-year period is CF Canlife Far East, which returned 106.6 per cent in this time.
Its 10- and three-year performance is also strong, but the vehicle has struggled over the past 12 months.