Top rated fund investors are backing the same bets; filling their fund-of-fund portfolios with similar holdings to their competitors.
Fund of funds – funds that invest in other funds rather than individual stocks or bonds, are arguably less risky as they hold more diversified assets in their portfolios. But they are also relatively expensive due to the second layer of charges on fund holdings. For investors who wish to enjoy diversification in their portfolios but cannot afford higher costs; investing in similar holdings as those fund of fund managers might help you to enjoy similar diversification at a lower cost.
Jupiter Merlin Balanced Portfolio, Jupiter Merlin Income Portfolio, both Silver Rated funds, and the Bronze Rated F&C MM Navigator Progressive fund, for example, have ongoing charges in the top 20% of the GBP Aggressive Allocation Morningstar Category average, reflecting the higher costs associated with a whole of market multimanager investment approach. However, these three are top rated by Morningstar analysts, and have outperformed consistently throughout years.
Jupiter Merlin Balanced Portfolio and Jupiter Merlin Income Portfolio both run a concentrated list of underlying fund holdings, typically held for many years, including well-known manager UK Equity Income star Neil Woodford. Both Merlin funds are managed by John Chatfeild-Roberts and Algy Smith-Maxwell, whose high-conviction style and depth of fund selection experience are liked by Morningstar fund analyst Randal Goldsmith.
These two funds outperformed consistently in the tougher years like 2008, 2011 and 2015, doing a better job than peers at protecting investors’ capital, and has outperformed in the majority of other years, Goldsmith said.
The multimanager team responsible for F&C MM Navigator Progressive fund is one of the most experienced and stable within the UK, Goldsmith said. It is led by Gary Potter and Robert Burdett, who have worked together since the early 1990s. Their main focus is on manager selection, and this is where they add the most value, Goldsmith said. This fund outperforms the GBP aggressive allocation Morningstar Category over the past one, three, and five years.
Using Morningstar Fund Screener tool, we also looked these four top rated multi-asset funds to see if they had any similar fund holdings. We also included the Premier Multi-Asset Growth & Income, the Bronze Rated fund which emphasises diversification and has a contrarian bias, as its managers, David Hambidge, Ian Rees, and Simon Evan-Cook prefer to buy funds when they are smaller and less well known or are run by value-aware managers.
3 Funds Top the Professionals’ Buying List
Using Morningstar Portfolio tool, we found three funds that featured in top rated fund managers’ top 10 holdings. They are Findlay Park American, Evenlode Income and Edinburgh Partners European Opportunities.
Findlay Park American is owned by Jupiter Merlin Balanced Portfolio and F&C MM Navigator Progressive. It makes up 12.4% of Jupiter Merlin Balanced Portfolio and 3.1% of F&C MM Navigator Progressive holds 3.1%.
Findlay Park American achieves capital growth principally through investment in the securities of companies in the Americas. The fund gains 22% year to date and it has 16.4% three years annualised return and 19.3% five years annualised return.
Evenlode Income, which is under the UK equity income Morningstar Category, is held by Jupiter Merlin Balanced Portfolio, Jupiter Merlin Income Portfolio and Premier Multi-Asset Growth & Income. Jupiter Merlin Balanced Portfolio holds 11.9% in the fund, Jupiter Merlin Income Portfolio holds 1.8% in the fund and Premier Multi-Asset Growth holds 3.6% in the fund. The fund is up 17.5% year to date and it has 16.8% five years annualised return.
Edinburgh Partners European Opportunities, a fund investing in Europe ex-UK Large-cap equities, is held by F&C MM Navigator Progressive and Premier Multi-Asset Growth & Income. The fund is up 5.2% year to date and it has 8.6% five years annualised return.
