Raging Bull Award for the Best (FSCA-approved) Offshore Global Asset Allocation Fund on a Risk-adjusted Basis over five years to December 31, 2018
The Investec GSF Global Multi Asset Income Fund is domiciled in Luxembourg and denominated in US dollars.
It was launched in July 2011. According to its December 2018 minimum disclosure document, the fund invests worldwide in a mix of assets, including bonds, equities and related derivatives, and cash. Normally the fund will invest no more than 50% of its value in equities.
Over the five years to December it delivered 3.1% a year, on average, in US dollars. Last year it returned 0.5% (against the MSCI World Index’s drop of more than 10% in US dollar terms).
Personal Finance put the following questions to the fund’s manager, John Stopford, head of Multi-Asset Income at Investec Asset Management.
Please outline your investment philosophy/strategy in relation to this fund.
The fund is focused on delivering a defensive return profile as consistently as possible.
The return is driven primarily by security selection emphasising investments capable of generating attractive and sustainable income with capital upside potential.
Building the portfolio from the bottom up is unusual for a multi-asset strategy, but we believe that the huge choice available at [this] level, rather than relying heavily on relatively blunt asset allocation decisions, gives us a greater ability to tailor the portfolio towards meeting a particular objective.
The fund targets low volatility through diversification and security selection, but importantly aims to limit drawdowns, by running less risk in more stressed market environments.
To what do you attribute the fund's outperformance in 2018? 2018 was unusually difficult for financial markets, with very few assets delivering positive returns. The fund was helped by owning securities with resilient cash flows, which held up better than broad market exposure. It was also fairly defensively positioned within equities, held little exposure to expensive corporate bonds, and didn’t rely heavily on government bonds, which performed poorly, given concerns about the impact of the withdrawal of quantitaive easing on all asset prices.
Were there any particular stand-outs in the portfolio? The fund benefited from security selection within equities and bonds, holding exposure to defensive stocks and to government bonds in markets such as Australia, which outperformed. Equity hedges to reduce market risk worked well, as did limited bond duration. The fund also held cheap call options in the Yen and on equity indices, which created upside potential, but not material downside.
How are you positioning your fund for the year ahead? We are pretty cautiously positioned going into 2019. The equity bull market is mature and may have ended and high-yield credit already looks to be in a bear market.
Economic indicators suggest weak growth in the first half of the year and the risk of a global recession is building over the next one to two years. Monetary policy has become a headwind and trade policy is also creating uncertainty. A continuation of the bull market probably requires more stable growth, more supportive monetary policy and a resolution of trade tensions. Some of these are likely, but they may take time to occur and more market weakness is probable before they are seen.
The outlook for the dollar and US Treasuries looks more mixed, also providing some relief for emerging markets. Volatility is likely to continue to pick up across asset classes, but we still see plenty of opportunities at a security level against this messy backdrop.