Investor Views: “I Want My Investments to Beat the Market”

Financial adviser Rowena Griffiths tells Morningstar why she’s a fan of active management - and how it has helped her build a personal pension protected against stock market losses

Emma Simon 16 December, 2015 | 3:45PM
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Rowena Griffiths has become more cautious with her investments as she has got older.

I don’t like seeing my funds fall by 30% – even if it means bigger gains at other times

This isn’t because she is planning to retire any time soon, but rather that she recognises she does not have the stomach for market volatility.

“The reason I have taken a more defensive investment strategy is because I no longer want the volatility that comes with investing in higher risk areas, such as emerging markets,” she said.

“Like most people I don’t like seeing my funds fall by 30% in the space of a year – even if this means bigger gains at other times. I’ve learned that I prefer slower and steadier returns on my money.”

“Active Fund Managers Can Deliver Value for Money”

Thanks to pension freedom rules she also expects to keep her savings fully invested for the longer term. But this doesn’t mean that Griffiths, 54, takes a passive approach to her investments.

She says: “I’ve always been keen on active management. I don’t want to simply ‘hug the index’. I think active fund managers can deliver value for money, whether you want a defensive approach in volatile times, or are pursuing a more adventurous growth strategy.”

Of course, she concedes that not all active fund managers deliver on their promises.

“You have to look at their track record and then keep an eye on performance to ensure they are still delivering the goods,” she said. “Strategies that seemed to have worked well for years don’t always work in different economic circumstances.”

When it comes to her own savings, Griffiths has backed some fund managers with enviable track records.

A portion of her ISA funds is currently invested with Fundsmith Equity and Troy Trojan Income.

Fundsmith Equity launched in 2010 and has a five-star rating from Morningstar, reflecting its strong performance. The manager, Terry Smith has a Bronze Rating. The fund was launched on the back of the success Smith achieved as an investment adviser to the Tullett Prebon, where he moved the pension fund out of deficit and into surplus.

Smith takes a very active approach with this global fund, and he adopts a rigorous screening approach.

Morningstar analysts say: “This fund is as characterised by what it won’t own, as what it will. The overriding philosophy is that Smith looks to invest in compoundable earners, which ideally he could own forever. Ultimately he aims to invest in companies that are already winners, not tomorrow’s ones.”

Since launch it has delivered annualised returns of 16.7%.

Defensive Income Fund for Total Returns

Troy’s Trojan Income fund is more of a defensive holding, but one that has also managed to outperform peers. Its manager Francis Brooke also has a Bronze Rating from Morningstar and the fund has a four-star performance rating.

The fund, like others in the Troy stable, places an emphasis on steady long-term income growth, strong risk-adjusted returns and the avoidance of permanent capital loss.

Morningstar analysts say: “To deliver these objectives Brooke constructs a relatively concentrated portfolio of quality UK companies and will also buy non-UK names on a stock-specific basis.”

The portfolio has “clear biases” and has shown significant divergence form the index on a sector basis. But Morningstar adds: “We believe this fund offers a strong choice for investors looking for a UK equity income fund in the hands of an experienced investor with a strong absolute return mindset.”

Pension Saving to Retirement and Beyond

“When I started my career I worked for Prudential for a few years so have a modest final salary pension from my time there,” said Griffiths.

She has also contributed to private pensions throughout her career, particularly once she left the relative security of a large employer.

“I set up my own financial planning firm in 2012, Female Financial Management,” she said. “I enjoy the work tremendously, and hope to continue working many years to come.”

Financial adviser Rowena GriffithsHer pension currently has a large holding in Prudential’s Prufund Growth fund. Which Griffiths considers an excellent fund for retirement.

“They declare an expected growth rate quarterly, so this is perfect for capital preservation when it comes to drawing an income. It is also well diversified, so suitable for the accumulation phase as well.”

As with other defensive funds this means it may not post the highest returns in periods of strong stock market growth. But these funds comes into their own during periods of market volatility, as has been seen this year.

Griffiths says she likes the flexibility investing into ISAs offer, alongside her pension funds.

“I was made redundant a few years ago, so I like the fact that I can access these ISA funds should I need too, although thanks to pension freedoms this will soon be an option with my SIPP too.”

Griffiths is a chartered financial planner and says she has always been a keen investor.

She adds: “I know not everyone is interested in finances – but it’s not like astronomy, where it doesn’t really matter if it’s not your thing. Pensions and investments are important and if you don’t engage with them you may end up with a poorer retirement as a result.”

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fundsmith Equity R Acc5.83 GBP-0.03Rating
Trojan Income O Acc359.03 GBP-0.74Rating

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk