Interactive Investor

This fund is back on track, so we are buying

8th November 2021 14:13

Douglas Chadwick from ii contributor

Saltydog analyst has upped exposure to an existing holding that’s returned to form in recent weeks.

This content is provided by Saltydog Investor. It is a third-party supplier and not part of interactive investor. It is provided for information only and does not constitute a personal recommendation.

Last month, the best-performing equity-based sector was North America, which went up by 3.7%. A couple of weeks ago our demonstration portfolios invested in the UBS US Growth fund, and we added to it last week.

Past performance is not a guide to future performance

Because the US is such a major economy, when the North American sector does well there are funds in other sectors that also tend to benefit.

The obvious example is the Technology & Technology Innovations sector. The largest companies in the world are Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Not far behind are Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ:FB), and Tesla (NASDAQ:TSLA). They are held by funds investing in the North American sector and funds investing in the Technology & Technology Innovations sector. When they are on the up, funds from both sectors would get a boost.

The same is also true for some of the funds in the Global sector. The sector definition is “funds which invest at least 80% of their assets globally in equities. Funds must be diversified by geographic region”. This means that in theory they can invest anywhere in the world, but a significant number have America as their largest regional holding. As an example, the Baillie Gifford Global Discovery fund has more than 70% invested in the US.

When choosing funds for our demonstration portfolios (Ocean Liber and Tugboat) we take into account how volatile the sectors have been in the past. To limit the overall volatility of our portfolios, our largest holdings tend to be in funds from the less volatile sectors. In our analysis we have put these sectors into our ‘Slow Ahead’ group.

In October, the best-performing sector in the ‘Slow Ahead’ group was ‘Mixed Investment 40-85% Shares’. According to the Investment Association (IA), funds in this sector are required to have a range of different investments. However, there is scope for funds to have a high proportion in company shares (equities). The fund must have between 40% and 85% invested in company shares.

Some funds in this sector are also biased towards the US. This is true for two funds that we have been holding for a while. The Royal London Sustainable World fund has over 40% of its assets invested in the US, and the Janus Henderson Global Responsible Managed fund only has slightly less, 35%.

Both these funds struggled in September, but have recently recovered and appear to be back on track. Last week, they featured in our shortlist of best-performing funds.

Past performance is not a guide to future performance

We reduced our exposure to the Janus Henderson Global Responsible Managed fund last month, but have now topped it back up again.

The Royal London Sustainable World fund is currently our largest holding.

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These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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