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News: Managing to make the most out of funds

Investors in managed funds made most money out of those funds with the highest exposure to equities, in the seven months to the end of July 2005, according to Standard & Poor's latest update on the sector.

This was true in the sterling sub-sectors as well as the global and euro sub-sectors, where equities significantly outperformed bonds. Among the sterling sub-sectors the best performer was Active Managed, which may be 100% invested in equities. This showed a median return of 11.6%.

Cautious Managed, which has a maximum permitted equity weighting of only 60%, showed a median return of 6.9%.

Meanwhile, in the euro sub-sectors, investors made most money (11.6%) from Asset Allocation Euro Dynamic, where the equity weighting is never less than 70%. And they made least (5.1%) from Asset Allocation Euro Defensive, which typically has no more than 30% in equities.

At the global level, where returns are measured in US dollars, the best performing sub-sector was Asset Allocation Global Dynamic, which returned 0.6%. The worst performer was Asset Allocation Global Defensive, which recorded a loss of 5.6%.

S&P fund analyst, Alison Cratchley says that fund managers are confident on the outlook for the UK equity market, although cautious about prospects for the consumer. Cratchley adds that a theme across both funds-of-funds and direct equity invested portfolios is a move up the capitalisation scale and an increased emphasis on growth. For example, Richard Philbin, who manages the £56 million F&C Multi Manager Balanced Fund, is focusing on large company, growth-oriented funds.

Similarly, Chris Burvill, responsible for the £223 million Gartmore Cautious Managed Fund, has adopted more of a growth bias, adding to the telecoms sector. He has also increased exposure to FTSE 100 companies, which now account for 82% of the equity component, up from 76% in April and broadly in line with their weighting in the FTSE All Share index.

Global fund managers are also positive on equities, generally favouring continental Europe, Japan and the Pacific Basin at the expense of the US.

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