- 75-80% of the fund is invested in equities, with the remainder held in bonds and cash
- A bias to UK companies is retained, with particular focus on those with strong barriers to competition
- The fund’s bond exposure is designed to provide an element of shelter from falling share prices
Our view / manager change
Jamie Hooper has been responsible for the UK equity portion of the AXA Framlington Managed Balanced Fund since November 2015, at which point Nick Hayes also took over the fixed interest portion of the fund. The global equity investments, covering the US, Europe, Japan and the emerging markets, continue to be managed by AXA Framlington’s regional equity specialists.
Jamie Hooper will assume overall management of the fund when current co-manager Richard Peirson retires in March 2017. This includes deciding how much of the portfolio to allocate to each individual equity or bond manager, and to cash. Jamie Hooper has worked alongside Richard Peirson for three years and his approach is similar so we do not anticipate this move to result in any changes to how the fund is managed.
We will monitor how the fund adapts to the change in management before considering the fund for the Wealth 150 list of our favourite funds across the major sectors. We will keep in close contact with the AXA Framlington Team and inform investors if our views change. Please note the fund has exposure to smaller companies, which are higher risk, and can use derivatives, which also adds risk.
The equity portion of the fund is biased to the UK. Jamie Hooper has focused this portion on companies with strong barriers against competition, such as Shire, RELX and Sage. He is aware the share prices of these business are currently highly valued following a period of good performance, but believes investing in these quality companies is more important than investing in lowly-valued, but lower-quality, companies over the long term.
Concerns over the health of the European economy remain and a number of upcoming political events, including several parliamentary elections, could cause market volatility. Mark Hargraves, manager of the fund’s European investments, has focused on quality companies with strong balance sheets, such as those in the healthcare, consumer and technology sectors, which he expects to perform well over the longer term. He expects interest rates to remain low for some time so has avoided the financial sector as low rates limit the income banks can earn from loans and credit. The fund also has little exposure to telecoms as the manager feels increased competition in the sector reduces the potential for growth.
The US portion of the fund has recently held back returns. Businesses that provide staple goods, such as Coca-Cola and Walmart, performed well when investors flocked to safety in the early part of last year, while economically-sensitive companies expected to benefit from Donald Trump’s initiatives were strong following the US election. The US portfolio, managed by Steve Kelly does not have significant exposure to either of these areas, and therefore underperformed.
The fund’s investments in Japan, managed by Chisako Hardie, contributed positively to recent returns. The Japanese stock market is dominated by large export companies. These businesses have suffered recently as a strong yen has caused the cost of their goods and services to rise for overseas buyers. However, some medium-sized companies, particularly innovative biotech and financial firms, have performed strongly. Chisako Hardie’s bias to these areas has benefited performance.
Asia and emerging markets
Julian Thompson focusses this higher risk area of the portfolio on companies in India, Mexico and the Philippines. He is encouraged companies in these regions have improved corporate governance over the past few years, while political developments has improved the environment in which they operate. The quality companies he seeks have mostly been found in the consumer and infrastructure sectors, which has resulted in a bias to these areas. Conversely, he has found few companies in the commodity sector that meet his quality requirements.
Nick Hayes has selected bonds that could provide an element of shelter from stock market falls. He feels bonds are overpriced but does not see this as reason to avoid the area. He likens the bond portion of the portfolio to home insurance – it is important to purchase house insurance even if the premium is high. 50% of the fixed interest portfolio is invested in UK bonds with the rest in other developed-market government bonds.
|Annual Percentage Growth|
| Dec 11 -
| Dec 12 -
| Dec 13 -
| Dec 14 -
| Dec 15 -
|AXA Framlington Managed Balanced||11.4||31||-3.1||15||25.1|
|IA Mixed Investment 40-85% Shares||13.32||2.43||4.69||14.43||9.87|
Past performance is not a guide to the future. Source: Lipper IM to 31/12/2016