Two Rated Multi-Asset Funds Compared

Senior manager research analyst Tom Mills joins Ollie Smith to examine the inner workings of two multi-asset funds

Ollie Smith 31 May, 2022 | 8:38AM
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Ollie Smith: We're back with another look at the funds causing our manager research team not a little bit of excitement. Senior manager research analyst Tom Mills joins me to discuss two in particular. Tom, tell me about Troy Trojan first.

Tom Mills: Thanks, Ollie. Good to be here. So the first fund I'm going to talk about is Troy Trojan, which has a Morningstar analyst rating of Gold for the clean share class. The manager and CIO, Sebastian Lyon founded the firm Troy Asset Management in 2000. And he's managed this fund since its inception in 2001. He's a cautious investor who believes preservation of wealth is key. And this strategy is managed with a focus on capital preservation, first and foremost, and then capital growth. So looking to outpace inflation, over the longer term, and that's a philosophy that served fund investors well, resulting in a strong long term track record over the past 20 years or so. And importantly, the fund's held up well, when equities have sold off heavily, recently in the early part of 2020, and also it delivered positive returns, for example, in 2008, during the global financial crisis as well.

Lyon's approach is straightforward. So the fund invests in equities, government bonds, gold and cash and equities are really the bedrock here. Lyon's looking for high quality companies with strong franchises, healthy balance sheets, and that's fairly concentrated. So you might see as few as 15 to 20 stocks here. And on the more defensive side of the portfolio, the bonds are mainly inflation linked TIPS. And gold is also an important diversifier with some important defensive properties for the fund as well.

OS: Great and our second fund is Ruffer Diversified, isn't it? Tell me about that.

TM: Yeah, that's right, Ollie. So that's another multi asset fund, and this fund was actually launched in September last year and was newly rated earlier this year earning a rating of Bronze for the clean share class, but although it's a new vehicle, it's based on Ruffer's long running flagship strategy which is also available in the weekly dealing Bronze rated LF Ruffer Total Return fund. And that's produced strong absolute and risk adjusted returns over the long term. So Ruffer Diversified Return has the same investment strategy and asset allocation as the flagship strategy, but in a more liquid portfolio. And that allows it to offer investors daily dealing. Whereas LF Ruffer Total Return is a weekly dealing offering. We think that Ruffer has the expertise to replicate the key components of this strategy in the more liquid format. So Ruffer also has a capital preservation focus, it's trying to protect and then grow the value of the funds. But there's also quite an explicit aim to avoid losing money in any 12 month period. The managers of the fund are Duncan MacInnes and Ian Rees although Ruffer's CIO Henry Maxey and founder Jonathan Ruffer are key here in setting the overall strategy as well.

OS: Sure. The two funds here, what do they have in common? And I suppose also, what are the key differences between them?

TM: They both share similar aims and objectives, and they have a similar capital preservation philosophy. They both aim to maintain a prudent mix of riskier assets like equities as well as more defensive assets to achieve that. They both invest in global equities and bonds, and prefer inflation linked bonds currently to conventional bonds. And in terms of performance profile. We don't expect these funds to keep up when equity markets are racing ahead. But providing some shelter in falling markets is really key to meeting their overall objectives.

OS: Sure. And then, just finally, what's the summary takeaway from this comparison, if you will?

TM: I guess just really, in terms of the differences between the funds is probably worth highlighting, I guess, Trojan sticks to conventional assets, whereas Ruffer uses some more complex instruments to try and protect the fund in difficult market environments. And I think that the takeaway there is really that both funds are all about preserving and growing wealth in real terms, but the different approaches show that there's more than one way to successfully go about doing so. And overall, we think each manager plays to their own strengths.

OS: Cool, great. Okay. Thanks, Tom. Great stuff. For more on manager research and fund research indeed, keep an eye out for our regular weekly Tuesday updates. Until next time, I've been Ollie Smith from Morningstar.

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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Ollie Smith  is editor of Morningstar UK