- This fund invests globally across shares, bonds and cash with the aim of producing inflation-beating returns
- Exposure to overseas currencies and investments boosted performance in 2016
- We view the investment team as an experienced and disciplined outfit
Tony Cousins and his team at Pyrford aim to preserve investors’ capital. Their main objective is not to lose money in any one-year period and to deliver inflation beating returns with less volatility than the stock market over the longer term. In doing so, they invest in the shares of high-quality companies, government bonds and cash. While they expect shares will perform well over the long term, they will invest in government bonds and cash when they feel that share prices are too high.
The team’s Pyrford Global Total Return Fund has consistently outpaced inflation over the longer term. Over five years, the fund has grown 22%* while also sheltering investors from much of the volatility associated with investing in the stock market, although past performance is no guide to the future.
|Annual Percentage Growth|
| Dec 11 -
| Dec 12 -
| Dec 13 -
| Dec 14 -
| Dec 15 -
|Pyrford Global Total Return||1.4||4.5||3.8||1.5||9.3|
|UK Consumer Price Index||2.7||2||0.5||0.2||1.1|
Past performance is not a guide to the future. Source: Lipper IM *to 31/12/2016
Tony Cousins and his team are experienced and disciplined investors. Their strategy of investing in stock markets when others are unwilling to, while taking profits following periods of strength, has added value for investors over the long term, although there is no guarantee that this will continue.
The team’s cautious approach means we would expect the fund to deliver modest, inflation-beating returns over the long term, while offering some shelter from the inevitable swings in the stock market. It retains its place on our Wealth 150+ list of our favourite funds across the major sectors.
The fund performed well in 2016. Sterling’s weakness against most major global currencies proved a significant tailwind and boosted returns from the fund’s overseas investments.
The team see greater value in the pound following its period of weakness. They have since increased exposure to sterling-denominated assets such as UK government bonds while reducing exposure to US government bonds. The fixed interest portion of the fund is focused on short-dated bonds, which are less sensitive to rising interest rates. As rates rise, bond prices fall (and their yields rise) as the interest rates available on cash looks commensurably more attractive. These investments could therefore offer some relative shelter in an environment of rising interest rates and bond yields. Please note that yields are variable and not guaranteed.
Pyrford Asset allocation changes
Source: Pyrford, correct as 31/12/2016
Following a period of weakness, the team felt stock markets offered greater value in early 2016 and increased exposure to shares to 35% of the fund. Global stock markets subsequently rebounded and the team took the opportunity to take profits from this portion of the portfolio in mid-2016, reducing exposure to 30%, which is in keeping with their process.
The team’s cautious approach leads them to invest in high-quality companies with stable sales and earnings growth, which they believe can thrive regardless of wider economic events. They recently purchased shares in Canadian National Railway. According to the team, the company has been consistently profitable; benefits from high barriers to entry from competition; and demonstrates pricing power, which means it can raise prices without affecting customer demand. The fund also has the flexibility to invest in higher risk emerging markets if the fund manager sees fit.
The team at Pyrford are cautious. In their view, the global economy is still recovering from the 2008 financial crisis and will remain in recovery mode for many years. The world continues to contend with excessive levels of debt; low economic growth; low interest rates; ageing populations; and disappointing levels of productivity growth. The portfolio is therefore defensively positioned. They believe valuations look expensive in many areas of the global stock market, but will look to invest further as value emerges.
Please note that as this is an offshore fund investors are not normally entitled to compensation through the FSCS.
Notice to income unit holders
The Pyrford Global Total Return Fund will make its next income payment on 14 February 2017. Investors who hold the income unit class on the ex-dividend date, 31 January 2017, will qualify to receive the income payment.
Typically, any income generated by a fund’s underlying investments gets paid out to income unit holders on the distribution date, less any charges taken from income. The Pyrford fund is different. An amount equivalent to the fund’s total return over the previous calendar (or the equivalent holding period if held for less than one year) is paid to investors. This includes any income and capital gains, less charges.
In a year when the fund performs well this can result in a high income payment to investors. In 2016, for example, the fund’s total return was approximately 9%. This will be the income payment in respect of that year. This means on the fund’s ex-dividend date, investors will see a drop in the fund’s unit price approximately equivalent to the income due to be paid. The income will then be paid to investors on 14 February 2017.
We would prefer Pyrford take a ‘natural yield’ approach and only pay out the income generated by the underlying investments. This means any capital gains would remain in the fund and be reflected in the unit price. This way investors benefit from any rise in the unit price once they sell their investment, while any income generated will continue to be paid out on the quoted distribution dates.
We have been in contact with Pyrford with a view to change their method for paying income. We hope to see the change implemented prior to the next payment date, although we will keep investors informed of any developments. As always please note the yield is not an indicator of future income.
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