Asset Allocation Research for UK Advisers

In the active world, is it ok to have more than one fund from one manager in a portfolio?  We think there are differences for single-asset funds and multi-asset funds.

For single asset funds, one reason for not having multiple funds run by the same team is key-person risk.
For multi-asset funds, the issue is less pronounced owing to team structures, but it really depends on the strategy.
So when building an investment portfolio, is it ok to have more than one fund from one manager?
We think it depends on the context.

According to Jackie Qiao, head of fund research at Elston Consulting, key-person risk is reduced when two elements are in place. Firstly, the success of the fund relies more on the overall capability and consistency of the team rather than just one individual's influence. Secondly, the investment process needs to be “robust and disciplined”.

However, there are some considerations to keep in mind. For instance, when utilizing multiple funds managed by the same team, the factors to consider differ between security selection funds and asset allocation funds.

For security selection funds, it can be beneficial if the investment philosophy and approach are similar. Qiao explains, “For example, a team focusing on UK small-cap and UK small-cap value shares a lot of overlap. But if the security selection strategies vary significantly (like UK small-cap versus UK large-cap), it is less likely that there is overlap, and we could question whether the same team can manage both.”

In the case of asset allocation funds, the emphasis is on multi-asset capabilities. For example, when considering a managed Equity, Bond or Alternatives allocation fund, there is a logic to having funds from the same range, that are managed by the same team to a consistent investment outlook with “broad diversification and dynamic asset allocation management.”

Qiao notes that having a consistent approach across asset classes from the same team ensures a consistent outlook. “It would be unusual to have an equity fund positioned for rate hikes and a bond fund positioned for rate cuts. Therefore, a single team-based approach for asset allocation funds is more sensible than for security selection funds,” she concluded.
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Read the Trustnet article here featuring Elston's Jackie Qiao on key things to consider.

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UK Equity Income: monthly index commentary for August 2024
by Rob Davies, UK Equity Income Index Specialist at Elston Consulting
 
August is typically a quiet month in capital markets. However, the slight positive return for UK equities in the month does not reflect the large swings seen in some Asian and US markets that occurred some days in the month.
 
Many commentators provided erudite explanations for the sharp moves after they happened, although fewer were made before the drops. In the UK the underlying corporate data was not much changed as there was little news flow, so attention was drawn to macro issues. There was a good start to the month on this front when interest rates were reduced but as this was expected there was little impact on the market.
 
The number of sectors that fell over the month was matched by the number that rose. The best performers were Health Care and Consumer Staples with the other gainers only edging into positive territory. On the downside Energy, Materials and Information Technology recorded the largest declines as might be expected of dollar earners in a period when sterling appreciated.
 
On a slightly longer time scale, since the start of the year, UK equities have so far delivered a robust performance with some sectors ahead by over a fifth and none showing negative returns.
 
On an even longer time scale of 5 and 10 years it is evident that UK equities with a bias to value have delivered better returns than the market after a long period when they underperformed.

UK equities have lagged global markets.  Henry Cobbe argues that the remaining case for owning them is as for diversification, not for growth.
Read the quote in the Trustnet article

Gold remains a useful diversifier because of its uncorrelated relationship with other asset classes.
As a “liquid real asset” It has inflation-protecting characteristics.
Gold provides protection against geopolitical risks and insurance against market shocks.
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View all our Gold & Precious Metals research

Six charts showing why UK equities are great diversifiers.

Read the article in Trustnet