‘We haven’t held property since 2007’

One-stop-shop funds are the ideal buy-and-hold strategy for investors, with the fund manager making the decision about which assets to buy and how to split money between stocks, bonds and cash. “Multi-manager” funds do this by investing in other funds, splitting the money between many different fund managers, each running a portion. At a time when some markets, such as the US, are being accused of being overvalued, this outsourcing of the investment decisions can be a way for investors to avoid making the tough decisions.

The £900m Schroder MultiManager Diversity fund is on the Telegraph 25 list of our favourite funds, despite concerns over some “multi-manager” funds that have extra costs for investors because of layers of management fees, as fund managers Marcus Brookes and Robin McDonald have shown high levels of conviction in allocating money.

Mr Brookes tells us why Europe is cheap, about his holding that fell 50pc and his dreams of being a rugby star.

How do you invest the fund?

The fund is invested one third in bonds and cash, a third in stocks and one third in alternative assets. However, that can make us sound incredibly lazy, and we’re not.

We don’t have a benchmark that says, for example, we have to be 50pc invested in the UK, so that one-third split is very flexible.

To decide the split we look at where we are in the “market cycle” and the appropriate portfolio for that environment. That asset allocation will help to determine the type of fund managers we want to invest with.

We are trying to get returns of the CPI measure of inflation plus 4pc each year.

You have 25pc of the fund invested in cash. Why?

We have not been very positive on bonds, so in that section of the portfolio we have 10pc in bonds and 25pc in cash.

We think bonds will react negatively to a rise in inflation and interest rates. We think where there is good economic growth, inflation tends to come.

That has led us over the past two years away from bonds, away from fund managers that have a “quality” bias or hold “bond proxies”, as those strategies worked well as interest rates and inflation came down.

We have been here for a while, and it has not been the most profitable trade.

We hold that money in a fund as we learnt a lesson from 2008 that if you physically hold cash it might get tied up in bank bankruptcy.

Where do you see opportunities at the moment?

Japan looks very cheap relative to America. We are still very negative on the US. It has seen good economic growth and is raising interest rates, but valuations are very high and there is quite a bit of Trump expectation priced into markets.

Europe looks relatively cheap, with very little expectation. In Europe there has been a pickup in economic activity, and really high unemployment rates are coming down, so there is a chance to pick up world-leading companies at a relatively good price.

We are staying away from property, and we haven’t held property since 2007. Last year was a bit of a wake-up that property is illiquid. The yields are quite good but they need to be quite a bit better to compensate for the risk of getting caught in a fund that shuts.

Schroders fund manager Marcus Brookes tells Laura Suter why property needs to pay more to be attractive

Over the past year what were your best and worst investments?

BlackRock Gold and General was up 85pc over the past year, and anything overseas did well because of the depreciation of the pound.

We didn’t really make anything on cash. And we invest in the Odey hedge fund, which was down 50pc last year, but that’s why it’s only a small position, of around 2pc of the fund.

You have underperformed your peer group. Why?

Those that sit in the same sector as us can be up to 60pc invested in shares. When markets are rising, which we have seen for the past two years, funds with more shares outperform.

Do you have your own money in the funds?

Yes, 99.5pc of my wife’s and my assets are in Schroder funds I run.

What would you have done if you hadn’t been a fund manager?

I would have asked Gloucester rugby club if they wanted a not very quick, fairly average full-back. I’d have also loved to have been a teacher.

How to buy the fund as cheaply as possible

The trust has a total cost (the “OCF” or “TER”) of Be sure to buy the right “share class”, which is “Z”. The investment shop through which you buy the fund will also levy a charge. Some will charge a

1.27pc a year.

percentage of the amount invested, others will apply a flat annual fee. Our colour coded tables at

telegraph.co.uk/investing

will guide you to the cheapest fund shop for your circumstances.

www.telegraph.co.uk/funds