I’m not expecting to take this money out for more than five years, perhaps 10 or more, depending on what happens.
I may end up drawing it down to pay a deposit on a house, but like the majority of my generation, that purchase will probably depend on the generosity of my parents.
Given I have quite a distant time horizon, my first thought was to put it in something high-risk – something in the emerging markets such as one of Aberdeen’s Asian portfolios.
On reflection, however, the thought of my first few thousands pinging around like coins in a tumble dryer wasn’t attractive.
Even if I know from my research that many volatile funds – smaller companies funds, emerging markets funds – do much better in the long-run, I’m not sure I will have the stomach to risk my first proper savings drop by 20 per cent and sit it out.
I’d love to buy Paul Marriage’s Cazenove UK Smaller Companies fund or the Aberdeen Asian Smaller Companies IT, but not quite yet. Even if smaller companies end their good run and Asian growth slows, there will be another growth sector or region for me to take advantage of a year or two down the line.
No, when it came to finally putting my cash on the table I decided to go for something much steadier. I want a basic core of my portfolio that I can add to with more exciting funds a bit later.
I’m going for CF Miton Special Situations – run by FE Alpha Manager Martin Gray and James Sullivan – to get me started.
Performance of fund vs sector since 1998
Source: FE Analytics
What I want is a fund that I can have reasonable confidence will give me growth over the next few years, with very little downside risk; a fund with low volatility and a record of steady gains.
I have absolutely no idea what will happen to the UK or the global economy over the next few years – and having worked in financial journalism for a little less than a year, I am more and more convinced that no-one else does either.
This means I want a fund that will perform predictably whatever happens, and CF Miton Special Situations fits the bill.
Just look at its performance in 2008 when the FTSE All Share lost 29.93 per cent.
Performance of fund vs sector and index in 2008
Source: FE Analytics
It has weathered the dotcom boom and bust, the boom up until 2007 and then the collapse of Lehman Brothers, at which point it poured itself a gin and tonic and went on its merry way upwards, ending 2008 up 7.26 per cent.
That is what I want should the eurozone collapse or China drag the world back into recession.
Of course, past performance does not predict future performance – except in a very obvious way: how a manager has responded to past crises is a good guide to what he is likely to do in the future.
It is not a perfect guide, because we are talking about human behaviour and judgment, and those aren’t perfectly predictable, but for me, from what I have learned writing about funds so far, it is the manager that is the most important element.
The funds that do best are those with better managers who make better judgments. Sure, you can make money with a tracker, but you can make much more with a good manager, and you can’t protect yourself against volatility with a tracker.
Looking at Martin Gray’s track record gives me confidence that he will make good calls on switching assets – certainly better calls than I would make.
Performance of manager vs peer group since 1999
Source: FE Analytics
The multi-asset nature of the fund is also important. I can’t afford to buy a diversified portfolio of funds, each with a different focus – that’s something I will create as time goes on. Gray (pictured) and Sullivan have the flexibility on their fund to buy pretty much what they like, and I like that.
Currently the fund has 32.7 per cent in managed cash, which some people would see as controversial, asking whether they should be paying someone who is just holding currency.
I would say it is worth paying for someone to decide when to hold cash and when to hold other assets.
The point is, I want someone to decide for me. I’m locking this money away where I can’t spend it on stupid things like holidays to Australia to watch the cricket (sigh) or weddings.
One of the fears I have about picking a cautious fund is missing out on equity gains, but CF Miton Special Situations has beaten the FTSE All Share over longer time frames (largely by doing so well in 2008), so although I won’t do as well as the best equity funds, I won’t do as badly as the worst.
It is tough being a financial journalist and seeing all these high-flying funds that I can’t afford to take a gamble on.
I will definitely be buying the likes of Liontrust Special Situations or Neptune UK Mid Cap in the future, but for now I’m sticking my first savings in a boring, slow-but-steady fund.
The adviser’s view: Kerry Nelson, Nexus IFA
"This is a great multi-manager fund for those clients who are making decisions for themselves or have smaller pots of money to invest, or perhaps are using their ISA allowance, where there can be a tendency to diversify too much." "Having access to this fund gives access to a professional who knows what he is doing, and also to lots of funds that can be impossible to access as a retail investor because they are soft-closed or institutional."
"Martin Gray is all about capital preservation while making real returns. He has loads of experience and has been in the multi-manager field for years and years."
"He’s seen all sorts of industry changes and market conditions. You have to be careful with multi-manager funds with what you are getting, they can be expensive and you want them to be able to deliver."