Which Funds are the Professionals Selling?

For many investors, market timing is best outsourced to the professionals. Fund-of-funds give investors access to hundreds of stocks and bonds, with only one single purchase

Emma Wall 8 September, 2016 | 4:21PM
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This article is part of Morningstar’s Back to School Guide to Investing. Join us every day this week to set yourself on the right path to investment success.

Market timing can be the difference between investment success and loss-making disaster. It is not enough to own a ten-bagger investment; you have to know when to sell-up and crystallise those gains too.

For many investors, market timing is best outsourced to the professionals – along with asset allocation. Fund-of-funds, or multi-manager funds, give investors access to hundreds of stocks and bonds, with only one single purchase. You can leave the hard stuff to the fund manager; deciphering market threats, economic tailwinds and fund analysis.

Taking Profits from UK Equity Funds

Keeping track of your fund of fund’s trades is not essential, but a responsible investor should monitor the movements of their portfolio. Over the last couple of months, top-rated multi-manager funds have had to contend with diverging global central bank policy, the Brexit vote and the resurgence of commodity prices.

Jupiter Merlin Balanced Portfolio, run by John Chatfeild-Roberts and Algy Smith-Maxwell has a Silver Rating from Morningstar analysts. Senior analyst Randal Goldsmith explains that the team’s investment process starts with a thorough assessment of the macro environment, which guides portfolio allocation and influences manager selection.

Recently, the fund has reduced its exposure to the Silver Rated UK equity income fund Woodford Equity Income, selling off £89 million worth of shares.

Morningstar analyst Peter Brunt recently upgraded Woodford Equity Income to a Silver Rating. “Our confidence is growing in this fund,” he explained. “It is managed by one of the most talented fund managers in the equity income sector, and, after some initial teething problems, we are reassured to see a period of increased stability at Woodford Investment Management.”

Merlin Balanced also sold £63 million share in Royal London UK Equity Income in recent months. This fund is rated Silver by Morningstar analysts. Analyst Sam Meakin says that manager Martin Cholwill is highly experienced, employing a proven strategy consistently. The fund has returned an average of 16% a year over the past five years.

Selling Out of Asia and Europe

The Bronze Rated F&C MM Navigator Progressive Fund run by Rob Burdett and Gary Potter has a five-year annualised return of 10%. Recently, the co-managers have taken the decision to sell out of BlackRock Global Funds Asian Growth Leaders by £2.9 million, JOHCM Continental European by £4 million shares and reduce their exposure to Majedie UK Focus by £4.7 million.

BlackRock Asian Growth Leaders has a Neutral Morningstar Analyst Rating, with analyst Germaine Share saying that it is a promising investment proposition, but the team is still building their conviction in the fund. JOHCM Continental Europe is Silver Rated, deemed a compelling choice for Europe ex-UK equity exposure. 

Deploying Cash for New Investments

Marcus Brookes, manager of the Schroder Multi-Manager Diversity fund, has been vocal in the past about the important of carrying cash in a portfolio – for providing liquidity and meaning that when investment opportunities arise, you can be quick to execute on them.

But recently Brookes has reduced his cash allocation by £19 million, as well as selling off £35 million worth of Man GLG Japan CoreAlpha and reducing his exposure to TM Sanditon European by £15 million.

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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About Author

Emma Wall  is former Senior International Editor for Morningstar