In the article “How to Live Well in Retirement?“, I favoured a dividend approach with some growth stocks to beat inflationary effects. Of course, this is just one strategy to provide a monthly income. Alternatively, you might favour a more conservative approach to growth with some dividends. If you are not a stock picker, then a more comfortable approach is to rely on fund or investment trust managers who have more experience. But even these managers do not always beat the proverbial monkey with a pin! For example, Neil Woodford’s star has not been shining brightly in the last 12 months or so! He has picked some catastrophic stocks, and demonstrated a fundamental weakness in Funds (rather than Trusts). If investors wish to sell a fund holding, then the Fund manager has to sell stock from his portfolio. Woodford had too many assets in illiquid holdings.
One theory of investing says that it is impossible for investors to succeed consistently. Fund Expert looks at that theory and alternatives. Instead they favour the Dynamic Fund Ratings system and show it is a proven alternative which means you can buy funds and achieve extraordinary success – based on just 2 hours work a year! Essentially, FundExpert.co.uk rates each fund from 1 Star to 5 Star. This “Momentum Rating” tells you if a fund should be bought. A 5 Star Momentum Rating should mean a high probability of extra growth. This is based on a form of momentum investing, which means buying an investment (in this case a fund) which is already performing well on the likelihood that it will continue to perform well. This process is called “Dynamic Fund Selection.” Historically, this strategy has worked extremely well. Of course, this is not necessarily a guide to the future. Every six months you review your funds, and re-adjust your portfolio to contain 5 star funds only. You can take income from dividends and top up income by selling some fund holdings. Fund Expert offers a free download explaining their system.
Another strategy is to follow Fund Managers who are consistent and leaders in their field. Perhaps not so exciting as following shooting stars with ups and downs. But for retirees a more conservative approach to fund selection could be based on consistent Fund Managers.
In this article, “Investment Week and Morningstar’s latest look at the most consistent fund managers across the unit trust and OEIC universe”. The data covers the three years to 20 April 2018. They highlight that Gervais Williams’ £1.1bn LF Miton UK Multi Cap Income fund held onto the top spot for an eighth week.
They refer to this table “The Consistent 50”. Here is an extract from the results ….
|Rank||Fund name||Consistency||3-yr return||5-yr return||Rating||General Sector||Portfolio Manager||Fund size £m|
|1||LF Miton UK Multi Cap Inc B Acc Instl||1||32.41||91.88||★★★★★||UK Equity Income||Gervais Williams||1125.35|
|2||Aviva Investors Euro Eq MoM 2 2 GBP Inc||3||45.23||79.67||★★★★||Europe Excluding UK||Not Disclosed||56.08|
|3||Man GLG Continental Eurp Gr Prf Acc C||3||64.93||141.6||★★★★★||Europe Excluding UK||Rory Powe||1466.61|
|4||JPM Em Mkts Small Cap A (dist) perf GBP||3||38.71||66.06||★★★★||Global Emerging Markets||Amit Mehta||1536.13|
|5||Aberdeen European High Yield Bond I Acc||3.5||16||29.63||★★★★||High Yield||Not Disclosed||67.67|
|6||T. Rowe Price Japanese Equity Q EUR||3.5||59.23||91.11||★★★★★||Japan||Archibald A. Ciganer||306.61|
|7||MI Hawksmoor Distribution B Acc||3.5||23.95||46.42||★★★★★||Mixed Investment 40-85% Shs||Daniel Lockyer||118.2|
|8||MI Discretionary Unit Inc||4||62.85||135.52||★★★||UK Smaller Companies||Melwin Mehta||49.38|
|9||Liontrust European Growth I Inc||4||44.88||77.17||★★★||Europe Excluding UK||James Inglis-Jones||154.77|
|10||Threadneedle Eurp Smlr Coms Z Acc GBP||4||63.13||106.58||★★★★||European Smaller Companies||Mark Heslop||4578.82|
|11||T. Rowe Price Eurp Smlr Coms Eq Q GBP||5||72.78||121.92||★★★★||European Smaller Companies||Ben Griffiths||174.61|
|12||Legg Mason MC Greater China A USD Dis(A)||5||43.53||87.35||★★★★||China/Greater China||James Chong||12.58|
|13||Sentinel Universal B Acc||5||21.37||45.57||★★★★★||Mixed Investment 40-85% Shs||David Hambidge||96.56|
|14||L&G UK Property Feeder I Acc||5||20.31||51.37||Property||Not Disclosed||3136.94|
|15||Baillie Gifford Global Inc Growth B Inc||5||37.84||70.11||★★★★||Global Equity Income||James Dow||493.27|
|16||Marlborough Nano Cap Growth P Acc||5.5||67.64||★★★★||UK Smaller Companies||David Walton||165.82|
|17||Liontrust UK Smaller Companies I Inc||6||76.48||137.76||★★★★★||UK Smaller Companies||Anthony Cross||856.54|
|18||L&G UK Property I Acc||6||20.36||51.39||Property||Matt Jarvis||3136.94|
|19||VT Greystone Conservative Managed R Acc||6||9.13||18.06||★★★||Mixed Investment 0-35% Shs||James Menzies||6.72|
|20||MI Hawksmoor Vanbrugh B Acc||6.5||20.98||38.64||★★★★★||Mixed Investment 20-60% Shs||Richard Scott||132.66|
|21||Kames Global Equity Income USD C Inc||6.5||35.55||66.29||★★★★★||Global Equity Income||Mark Peden||419.57|
|22||Marlborough High Yield Fixed Int P Inc||6.5||16.69||29.37||★★★||High Yield||Steven Logan||79.73|
|23||Rathbone Strategic Bond Instl Inc||7||12.88||20.92||★★★★||Strategic Bond||Bryn Jones||112.52|
|24||Veritas Asian A GBP||7||52.94||102.77||★★★★★||Asia Pacific Excluding Japan||Ezra Sun||1209|
|25||Kames Global Equity Income EURH B Acc||7.5||48.12||61.98||Global Equity Income||Mark Peden||419.57|
A possible strategy is to select 10 funds across different sectors with fund size > £100m and review every six months. Collect dividends and top up income by selling some holdings as required.
From this list – here is a suggested portfolio!
|Fund name||General Sector||Portfolio Manager||Fund size £m||Price|
|LF Miton UK Multi Cap Inc B Acc Instl||UK Equity Income||Gervais Williams||1125.35||203.85p|
|Man GLG Continental Eurp Gr Prf Acc C||Europe Excluding UK||Rory Powe||1466.61||568.00p|
|JPM Em Mkts Small Cap A (dist) perf GBP||Global Emerging Markets||Amit Mehta||1536.13||1026.00p|
|T. Rowe Price Japanese Equity Q EUR||Japan||Archibald A. Ciganer||306.61||€17.92|
|MI Hawksmoor Distribution B Acc||Mixed Investment 40-85% Shs||Daniel Lockyer||118.2||180.35p|
|Threadneedle Eurp Smlr Coms Z Acc GBP||European Smaller Companies||Mark Heslop||4578.82||113.19p|
|L&G UK Property Feeder I Acc||Property||Not Disclosed||3136.94||88.98p|
|Baillie Gifford Global Inc Growth B Inc||Global Equity Income||James Dow||493.27||685.20p|
|Marlborough Nano Cap Growth P Acc||UK Smaller Companies||David Walton||165.82||182.58p|
|MI Hawksmoor Vanbrugh B Acc||Mixed Investment 20-60% Shs||Richard Scott||132.66||157.58p|
Basis of the Consistent 50
The Consistent 50 is based on an assessment of all IA funds in the UK as monitored by Morningstar. Each fund is assessed for its consistency against other similarly invested vehicles as classified by IA sectors.
In the first step, all funds without a three-year track record are excluded. In order to ensure statistical validity, sectors with less than 20 funds are also excluded, as are those that do not allow like-for-like comparison, such as Specialist, Guaranteed/Protected and Money Market.
The three-year consistency score is then calculated by measuring a fund’s average decile ranking (ADR) of quarterly performance periods rolling back on a month-by-month basis over three years.
The better a fund performs against its peers over a single period, the higher up the ranks it sits and the lower its decile rank. An average of a fund’s decile rank as measured over the multiple time periods provides an indication of how much it moves up or down the ranks relative to its peers.
The bottom 60% of the funds across all sectors are then excluded based on the average decile rank. The remaining 40% of funds across all qualifying IA sectors are then sorted according to how they rank against their peers in terms of volatility and Gain/Loss Profile (with those funds with lower volatility being rewarded and equal weighting given to both measures). The top 50 funds are shortlisted to make the Consistent 50.
All data is calculated on a bid-to-bid, net income re-invested, sterling basis.