The funds benefiting from calmer waters

by Douglas Chadwick from interactive investor |

It's been full steam ahead for the Saltydog analyst, with less adventurous funds playing their part.

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.

Every week we analyse the performance of thousands of Unit Trusts, OEICs, ETFs and Investment Trusts.

We split them into their Investment Association sectors, so that we can track the individual sector performance, and then combine them to form our own proprietary Saltydog Groups.

Which sectors end up in which Groups is determined by their historic volatility. The funds which do best in the good times tend to suffer the most when things go wrong. When we put together our portfolios we like to have a balance between the more volatile funds, which could be more rewarding when everything is going up, and the less volatile funds which may give adequate returns, but should suffer less in a downturn.

The Saltydog Groups are:

  • Safe Haven.
  • Slow Ahead.
  •  Steady as She Goes.
  • Full Steam Ahead-Developed Markets.
  • Full Steam Ahead- Emerging Markets.

The nautical names of these groups give an easily recognisable indication of the volatility of the sectors and funds which are allocated to the groups. Using the performance data it is easy to see whether the increased risk associated with the more volatile funds is then being rewarded.

In the last quarter of 2018 we dramatically increased the amount of cash that we were holding in the portfolios as we saw stock markets around the world heading south. Since Christmas we have been slowly moving back into the markets as conditions have improved.

The sectors which were hit the hardest, like Technology & Telecommunications, have rebounded the most. We have been pleased with the investments that we have made in the Fidelity Global Technology and the Polar Capital Global Technology funds, which are both up by around 7% since we went into them in January. We've also had some success with funds investing in China and Gold, however all of these funds fall into our most volatile 'Full Steam Ahead' Groups. 

In the 'Slow Ahead' Group, the leading sector over the last few weeks has been the Mixed Investment 40-85% Shares sector, and the recent performance of the leading funds has been far from shabby with four week returns ranging from 3.2% to 5.0%.

We invested in the Janus Henderson Global Responsible Managed fund and the Liontrust SF Managed fund at the beginning of February and added to them last week. They're both showing gains at the moment and if equity markets continue to do well then hopefully they'll also continue to go up, albeit not as quickly as some of the more adventurous funds that we are holding.  On the other hand, if the recent recovery falters then we wouldn't expect them to fall as dramatically.

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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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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