Looking At Mixed 20%-60% Shares–September 2019

Investors and advisors will remember the old IA Cautious Managed sector as it was to the end of 2011. The collapse of the ill-feted Arch Cru Fund in 2009 (which was classified in that sector), may have been a contributor to the desire for the IA to make the managed sector names less prescriptive and more informative for investors. This certainly is the case for the Mixed 20%-60% Shares classification.

This is a popular home for investors seeking broad exposure

The IA Mixed Investments 20-60% Shares classification as it is now known remains a popular home for investors who seek a broadly mixed exposure of assets with both an eye on capital growth and capital preservation. The sector’s importance is reflected in its considerable size with over £53 billion of assets (as at September 30, 2019).

There is a considerable risk difference in funds at either end of the asset allocation spectrum in this classification. This is reflected in the variation of returns: Over the three years to 30 September 2019, the best performing fund returned 30.8% whilst poorest performer over the same period returned -0.9% against the sector return of 13.7%.

Exhibit One. Top-performing IA Mixed 20%-60% Shares Funds ranked over 3-years (with 5-year history – to September 2019)

(Click on image to enlarge)

Source: Lipper by Refinitiv. Lipper for Investment Management. Past returns are not a reliable indicator of future returns.

This is a favorite classification of mine. There is a good selection of well-respected funds here many of which can form a solid foundation for a diversified investment portfolio. The key Lipper Leader metrics here are Consistent Return matched with a decent Preservation metric.

Kames Diversified Monthly Income Fund scores full marks in each Lipper Leader metric (this is very unusual) and there are strong offerings from RLAM, Liontrust, Seneca and M&G.

Most funds are currently at the higher end of permissible equities exposure

It is worth noting here that most of the funds in this month’s table are at the higher end of the permissible equity allocation. The average split for these 10 funds is over 50% equity. Investors should always be checking fact sheets to see how their funds asset allocations compare.

On this basis, I think the IA was right to do away with the “cautious” label. Certainly, a portfolio with 50% equities could be quite volatile, although the strong Preservation metrics for these 10 funds, suggest they are doing something right across their asset allocation strategies.