How will Brexit play out? Where will inflation end up? Will interest rates rise again?
I don’t have the answers to any of these questions. Nor does anyone else. And even if I did, I couldn’t tell you what the impact would be on stock markets.
Events can have a big impact on stock markets in the short term, but trying to predict how such events will unfold, let alone how the stock market will react, is impossible.
Ultimately, share prices have tended to rise over the long term to reflect growth in company profits. So, the main question is: will companies, on aggregate, grow their profits? If you think the answer is yes, and I do, you should be comfortable investing for the long term, and see through the inevitable ups and downs.
The future is bright
The reason I am confident in the long-term outlook for corporate profits is the very reason we should all be happy to invest in the first place – humans and their ability to survive, adapt and flourish. This has been a constant force for over 2 million years. Everything else pales into short-term insignificance.
Consider your surroundings. See the UK's 30 million homes, 26 million cars, 6,700 planes, stocked supermarkets, world-class health service, leading universities, you name it – they all represent the innovation of humans over generations.
This ingenuity, combined with a market system and rule of law, suggests the future will always be brighter than the past. For investors, this should never be forgotten.Great companies are the key to global investment success A refreshingly straightforward approach to investing globally.
Our solution to global investing
We spend a lot of time trying to identify skilled fund managers. Those who get the big decisions right more often than not. Those who can identify the good companies and avoid the weaker ones. Those who will outshine their peers in the long run.
The best fund managers will never be confined to one sector or region, so it’s possible to have a good spread of UK and overseas investments. We’ve managed the HL Multi-Manager Special Situations Trust for almost 17 years, selecting who we believe to be the best fund managers in their fields. And it’s proven a great success.
We feel the additional layer of management associated with our multi-manager approach more than makes up for the higher charges.
The Trust contains our favourite UK and overseas funds in a single, globally diversified investment. The fund invests in smaller companies and emerging markets which adds risk. Since its launch in April 2001 it has grown by 273%* compared with 167%* for the average fund in the IA Global Sector. Please remember past performance is not a guide to the future.
Roger Clark, who co-manages the fund alongside Lee Gardhouse, our Chief Investment Officer, explains in more detail how the Trust is managed.
What is the HL Multi-Manager Special Situations Fund?
Roger: HL Multi-Manager Special Situations is our global equity multi-manager fund.
We aim to achieve the high possible returns from a portfolio of our favourite funds, invested around the world.
What is your investment philosophy?
Roger: As fund managers, we’re often asked questions like ‘how will Brexit play out?’ or what we’re doing to prepare the portfolio for global events.
In reality these events can have big short term impacts on markets, but trying to predict the outcome and then the market reaction, can be very difficult.
History has shown us that over the long-term, markets tend to reflect the growth in company profits. And the shorter-term gyrations can become noise when viewed through a longer-term lens.
We focus on what we can control.
So for the best results we feel it’s more important to invest with the best fund managers in the world, rather than be in or out of markets at the right time.
In the same way stronger companies tend to outperform weaker ones, we feel the best managers tend to outshine their peers over the long-term.
We have been managing this fund for almost 17 years (fund launched 2001) and feel our core skill involves uncovering these exceptional managers. We consciously aim for a geographically diverse portfolio, but our main focus is finding the best talent from around the world.
How do you select funds?
Roger: A key part of the process is our fund analysis model. We analyse over 2,700 funds and construct individual track records for mangers.
We have a team of analysts who look through portfolio holdings and look for exactly what drives a portfolio managers returns over time. Principally, by picking the right companies.
Once we’ve narrowed down the universe, we then carry out further in-depth analysis by meeting fund managers. In these meetings we really try and understand all aspects of the fund and how it operates. We try and understand the philosophy, the research process and how the manger puts together their portfolio.
We also really try to understand what it is that drives the fund manager. We like to see alignment of interest, whereby if clients do well, the fund manager does well.
How do you put the portfolio together?
Roger: We blend together different managers, of different styles, and blend together a geographically diverse portfolio.
We can combine the best managers who hunt for the most attractive large companies, with those that seek higher-risk smaller companies.
Smaller companies can offer handsome rewards, as they tend to be under researched, and so a good manager can have an edge over other investors.
This combination of different styles means we end up with a highly diverse portfolio.
For example, the three most recent additions to the fund include a manager buying smaller companies across Europe, a manager buying companies with a global remit, and a fund investing in Asia with the scope to invest in companies of all sizes.
We are also able to access funds that aren’t widely available to our clients.
Lastly, once we have a list of what we believe to be the best funds available, we choose the correct weight for each and then rebalance the portfolio daily with this in mind.
This video is not personal advice. If you are unsure of the suitability of an investment please seek advice. Investments can fall as well as rise and you could get back less than you invest.
Past performance is not a guide to the future.
HL Multi-Manager Special Situations is managed by our sister company, HL Fund Managers Ltd. We feel the benefits of a multi-manager approach more than justifies the additional costs associated with a multi-manager approach.
HL Multi-Manager Special Situations - performance since launch
Past performance is not a guide to the future. Source: Lipper IM* to 31/12/2017
|Annual percentage growth|
| Dec 12 -
| Dec 13 -
| Dec 14 -
| Dec 15 -
| Dec 16 -
|HL Multi-Manager Special Situations Trust||22.0%||5.8%||8.2%||17.2%||16.6%|
|IA Global Sector average||21.8%||7.4%||4.0%||24.0%||14.1%|
HL Multi-Manager Special Situations is managed by our sister company, HL Fund Managers Ltd.