Investor Views: "Why I Like Fund Performance Fees"

Private investor Jo Lombardi invests up to four times a month to try to counter market volatility

Emma Simon 17 January, 2018 | 1:02PM
Facebook Twitter LinkedIn

Jo Lombardi, a tutor in economics, accounting and finance, describes herself as a “buy and hold” investor, who is prepared to take a degree of risk with her portfolio.

No-one can consistently time the market. I add to my portfolio throughout the month

She says: “I take the long-term view. I don’t want to take excessive risks, but I am perfectly cool about short-term losses and understand a degree of volatility is necessary to achieve longer-term returns.”

Lonbardi invests in a broad portfolio of funds, many of which are index trackers. She also has a proportion of her money in actively managed funds. In recent years, this has included Orbis Global Equity.

She says: “I was looking to set up a Junior ISA for my children and Orbis was one of the few managers that allowed me to transfer their Child Trust Fund. It’s their performance-related fees that convinced me. As an economist this model makes perfect sense to me.”

On top of investing on behalf of her children, she also invests in an ISA account for herself.

Lombardi, who is 54, invests regularly, drip feeding her investments. These regular contributions help smooth out the ups and downs of the stock market, known as pound cost averaging. This is usually done on a monthly basis.

But Lombardi takes this principle one step further by investing four times a month. She says: “No-one can consistently time the market. I add to my portfolio throughout the month. Some will be good days to invest, others less so but I’d have to be really unlucky if all these were the worst days you could pick.”

Lombardi says she has been “very pleased” with the performance of the Orbis fund to date, although she stresses that this is no guarantee of future performance. “But if the fund does go through a period of patchy performance and underperforms its benchmark, at least I won’t be paying fees,” she says.

Blending Active and Passive Funds

Elsewhere Lombardi invests in a range of passive index funds with low management charges, including Fidelity Index UK Fund.

When investing in sectors deemed higher risk, such as small caps and emerging markets she uses actively-managed funds including Templeton Emerging Markets Smaller Companies and Marlborough UK Micro-cap Growth.

“I think there is more potential for some stocks to be mispriced, so this creates opportunities for more active managers,” Lombardi says.

The Templeton fund has a Bronze Rating from Morningstar fund analysts, while the Marlborough Micro-cap fund has a five-star rating, reflecting its strong performance against peers over recent years.

Although Lombardi says she is prepared to shoulder a degree of risk in her investments, there are certain assets she avoids. “I don’t invest in commodities like metals or gold,” she says. She also avoids property investments as she already has direct investments in this asset class.

Lombardi says that the bulk of her investments are held through Fidelity’s brokerage service. She says: “For the size of my portfolio it is competitive on charges, while also giving a bit more of the personal service I want.”

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.

Facebook Twitter LinkedIn

About Author

Emma Simon

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