5th June 2014
Hargreaves Lansdown’s head of investment research Mark Dampier, a man whom his colleagues are describing as the Roy Hodgson of the investment world, has selected his fantasy fund management World Cup squad.
How to build an efficient portfolio using ETFs: Click here to find out more about Mindful Money’s live webcast on Thursday, 12 June.
With perhaps a little bit of a groan, though accepting that it does make for a pretty interesting line up, Mindful Money brings you the team selection below.
There are a number of parallels between picking a winning football team and building a successful portfolio. The starting point is obviously to find the best performers, but then you need them to fit together well. You wouldn’t dream of sending out a team with 11 strikers and similarly, you’d be reckless to base your portfolio just around emerging markets funds. It’s also wise to have a blend of styles so that you can cope with varying conditions. This is where the skill of the manager comes in.
The goalie needs a safe pair of hands to get you out of trouble when all else has failed. It makes sense that this position is reserved for a defensive fund manager, who can protect capital.
Sebastian Lyon, Troy Trojan – is a natural fit for this position. More in the mould of Joe Hart than David James, this manager will provide some security to your portfolio. His primary objective is to preserve capital, from which he will aim to grow the portfolio. It is easier to make a profit by not having to recoup past loses.
The main role for these funds is to protect your capital when markets are under pressure but they also need to be capable of scoring good returns when conditions are right. As with any team, it’s vital they work well together.
Richard Ford, Morgan Stanley Sterling Corporate Bond – a conservative, mainstream, corporate bond manager. The fund will invest defensively, protecting investors’ capital and not taking too much risk. The Gary Cahill of the investment world.
Richard Pearson, AXA Framlington Managed Balanced – Pierson brings over 40 years’ experience to the table. He is looking for growth through identifying opportunities ignored by others. An astute stockpicker and calculated risk taker. The fund should be viewed as a good core holding to any portfolio.
Iain Stewart, Newton Real Return – Stewart constructs a portfolio based on long term themes he believes will drive investments. He runs an unconstrained portfolio which invests in shares, cash, bonds and derivatives. A good defensive all – rounder, like Phil Jagielka.
Paul Read/Paul Causer, Invesco Perpetual Tactical Bond fund – this fund has a more flexible approach to investing in corporate bonds, where the managers have greater freedom to make changes to the investment portfolio and do not have to rely on rising markets to generate returns. Some similarities to an attacking full back like Leighton Baines – willing to exploit attacking opportunities when they present themselves.
Here we are looking for fund managers who are able to deliver growth, provide diversification and stability to the portfolio. Unlike the defensive elements of a portfolio, managers here need to be able to take on more risk. However, such funds should not be overly aggressive and should act as a core investment element.
Richard Buxton, Old Mutual UK Alpha fund – a stock picker who is also able to consider the bigger picture and take a long-term view. Buxton looks for where growth is going to come from next, not where it has come from. Buxton runs a concentrated fund and invests in companies with healthy balance sheets. He has substantial experience using this approach and aims to deliver growth but will not take unnecessary risks, in the Stephen Gerrard mould.
Nick Train, Lindsell Train Global Equity – focus is on the long game. Train looks for companies with strong brands and reliable repeatable businesses, buys them at attractive prices and then holds them for the long term. Train does not fall victim to fashion or changing trends and will stay invested through the ups and the downs, the consistency of Frank Lampard.
Richard Colwell / Leigh Harrison Threadneedle UK Equity Income – equity income takes a more defensive approach to investing but with the aim of delivering results and a focus on the long game. This fund can sit at the back of a portfolio and do all the hard work with dividends driving performance, just like James Milner.
David Dudding, Threadneedle European Select – Dudding has a strong focus on company fundamentals and pays little attention to the wider picture. The manager puts a lot of emphasis of buying stocks at the right price and not overpaying for great investments, as Arsenal did with Alex Oxlade-Chamberlain.
Here we are looking for the goal scorers, the areas from where growth is most likely to come. These funds are riskier and are more susceptible to market movements, but their aim is to provide growth to the portfolio. This doesn’t mean the managers take unnecessary risks but they are riskier (and potentially more injury-prone!) than other members of the team.
Giles Hargreaves, Marlborough UK Micro-Cap growth – like scoring a goal in the world cup, selecting the winners from the UK’s large pool of smaller companies is no easy task and few fund managers make the grade. In our view Hargreaves is one of them. Strong stock picking has been the main driver of this performance, according to our analysis and in addition he has historically managed to shelter investors from the worst of any falls in the market. Smaller companies have performed well over the past year, just like Daniel Sturridge. England supporters will be hoping he can find the net again this summer.
Angus Tulloch, First State Asia Pacific Leaders – this region is home to some of the most dynamic economies in the world and is often cited as having the greatest long-term growth potential. The manager’s focus on large, high quality businesses with strong cash flows means the fund’s performance can seem pedestrian in a rising market but really comes into its own in falling markets. Tulloch has been there and done it, like Wayne Rooney, and is arguably the star of the team. England needs their talisman to deliver the goods this summer if they’re to stand any chance.
Register here for Neil Woodford updates and receive a free research report.