The ultimate, eggs-in-one-basket fund for you and your risk appetite
Investors need a diversified portfolio. But what if you had to put all your eggs in one basket? Sam Benstead identifies the ultimate fund for your risk appetite
If you could have just one fund as a long-term investor, what would it be? This is the type of question that sparks dinner party debates for amateur and professional investors alike.
The perfect fund would grow your money in good times and protect it in hard times. It needs an excellent manager at its helm with experience navigating all sorts of market conditions. It would also have to be competitively priced and have an excellent track record.
Telegraph Money asked professional stock pickers which global fund would suit a high, medium and low-risk investor if they could own just one.
High risk
Fundsmith Equity
Rob Burgeman, of investment manager Brewin Dolphin, chose famed fund manager Terry Smith’s £20bn Fundsmith Equity as his “fund to rule them all” for investors with a high-risk appetite.
“Mr Smith can be a polarising character but his mantra of ‘buy good companies and do nothing’ has delivered excellent returns and would suit investors with a long time horizon,” he said.
Peter Brunt, of financial data group
Morningstar, also named this fund as one of the best options for investors looking to own high-quality global companies.
Its top holdings include Visa and Microsoft, which are primed for growth as society becomes more digital, but also have reliable revenues and strong brand power.
While the fund only has a 10-year track record, Mr Brunt said Mr Smith had been involved in managing a pension fund before launching his own business and has successfully beat his peers over a range of market conditions.
The fund is large at £20bn in assets, but Mr Burgeman said that because it owns extremely large companies it should not suffer from liquidity problems if investors pulled money from the fund too quickly.
It charges 0.9pc, but with its “do nothing” attitude, transaction costs are low, which makes it competitive compared to its rivals, Mr Burgeman said.
The fund has soared past its competitors since launch, returning almost 350pc. The FTSE World index returned 175pc in this period and the average fund manager in this sector returned 120pc.
Medium risk
The Bankers Investment Trust
For medium-risk investors, Ryan Hughes of fund shop AJ Bell picked out the £1.2bn Bankers Investment Trust.
“It aims to deliver long-term capital and dividend growth above inflation and it has met these goals. The trust has huge pedigree going back 130 years.” he said.
This means it has proven itself in difficult markets, according to Mr Hughes. It is managed by Alex Crooke, who has been in charge since 2003. It invests globally but has a bias towards Britain, which accounts for 25pc of its assets. This helps boost the fund’s yield, which is currently around 2pc.
Its holdings provide a balance of stability and growth, suitable for medium-risk investors. It is invested in technology giant Google alongside American Tower, which owns communications towers and has consistent sales across all economic conditions.
The fund is diversified and does not have more than 2.5pc in any single company. This reduces the risk that a misjudged stock pick will sink the fund.
Bankers has beaten the FTSE World index by 200 percentage points over the past 20 years and has returned around 120 percentage points more than similar funds as well. It has over
£1bn in assets and charges a competitive 0.52pc.
Low risk
BNY Mellon Global Income
Daniel Pereira, of fund research group Square Mile, said the £5.7bn BNY Mellon Global Income would be an ideal onestop-shop for a lower-risk investor. It invests in companies anywhere in the world but focuses on the higher-yielding end of the market. It yields 3pc.
The fund balances income generation with capital growth and adheres to strict buying and selling rules to meet this target. It can only buy companies that yield a quarter more than the global stock average, which is currently close to 3pc, and is forced to sell them if they drop below the market average.
Manager Nick Clay – who has been in charge of the fund since 2015 but has 30 years of industry experience behind him – said this means that they never clutch blindly to companies that do not meet their income targets.
“Of the 100 sales we have made since 2010, 60pc have gone on to underperform the global stock benchmark over the next 12 months. This means that the strategy works,” said Mr Clay.
Mr Pereira said the preference for steady and reliable businesses means the fund is likely to underperform when the market is booming. However, what is given up in exuberant times is offset by the ability of the fund to protect investors’ money when global equity markets experience periods of volatility, he added.
Since its launch in 2005, the fund has returned 290pc, beating the 250pc return from the FTSE World and the 190pc return from the average global income manager – impressive for a fund with a defensive tilt. It charges 0.8pc.
0.9pc
Fundsmith Equity’s fee. However, its transaction costs are low, making it an attractive proposition ‘Bankers Investment Trust aims to deliver long-term capital and dividend growth above inflation and it has met these goals’