Pyrford Global Total Return: March 2022 fund update

• The fund is run by a very experienced team, averaging over 23 years’ experience in the industry
• We like their long-term, disciplined investment philosophy, which has been in place for many years
• Long term performance has been delivered with much lower levels of volatility compared to broader global stock markets
• The fund is on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Pyrford Global Total Return fund aims to deliver stable returns ahead of inflation over the long term and provide some shelter for investors’ money in times of hardship. While it won't shoot the lights out, the managers try to grow investors' wealth modestly over the long run, without all the significant ups and downs of investing fully in the stock market. Like all investments it will still rise and fall in value, so investors could get back less than they invest.

We believe this fund could be a good option for a more conservative portfolio, or a way to bring some stability to a broader investment portfolio.

Manager

The team behind this fund is made up of a number of highly experienced investors. Tony Cousins leads the team and has worked at Pyrford for more than three decades. Cousins is also Chief Executive Officer and Chief Investment Officer of Pyrford. This increases his responsibilities, but we are comfortable he spends most of his time on fund management and that he receives vital support from the rest of the team. They help with other research, such as the analysis of individual companies.

Bruce Campbell, who is part of the group’s investment Strategy Committee, helped found the business and has more than 50 years’ experience in the industry. The committee is in charge of broader decisions, such as the portfolio's asset allocation - the amount invested in various assets, such as shares, bonds and cash. Overall, there has been little change within the team, which we view positively.

Process

The Pyrford Global Total Return Fund launched in 2009 and Cousins and the team have three key aims. Their first is not to lose money over a 12-month period. Their second aim is to deliver an inflation-beating return over the long term, and thirdly, to do this with low volatility – fewer significant ups and downs in value than a fund invested entirely in shares.

In order to achieve this, the team invest flexibly in three main assets - shares, government bonds and cash. They can invest in companies across the globe, with the flexibility to invest in emerging markets, which increases risk if used. The shares are expected to perform well and generate most of the fund's growth over the long term, but can be quite volatile in the short term. The bonds and cash are expected to perform differently, and bring some stability to the portfolio.

When the team is more positive in their outlook, they invest more in shares. They also invest more in shares when stock markets have fallen and they can buy shares at lower prices, which have the potential to rebound. The team were strict in this discipline over the pandemic and amid the market fall in March 2020, they decided to add to shares at more attractive prices, increasing the allocation to shares to roughly 45%.

More recently, though, they’ve reduced the amount invested in shares down to around 35%, selling some companies including freight transportation company CH Robinson, following a period of strong performance.

When the team is more cautious in their outlook, they invest more in bonds and cash. Bonds and cash currently make up around 62% and 3% of the portfolio, respectively. Overall, there haven’t been many recent changes made to the portfolio. This is partly because the team feel both shares and bonds are quite expensive, so are happy to continue holding a small cash buffer while they await future opportunities.

Please note as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.

Culture

Pyrford International was established in 1987 and previously owned by the Bank of Montreal. Pyrford is now part of Columbia Threadneedle Investments, the global asset management business of Ameriprise Financial Inc, following an acquisition completed on 08 November 2021.

Pyrford continues to operate as a fully independent boutique and retains control over its investment activities, staying true to the philosophy it's developed over many years.

We like that Pyrford is home to a stable and close-knit investment team. There has been little turnover within the team and most members have spent the bulk of their investing careers at the group. This reflects well on the culture they have cultivated over the years. We think the team has done a good job at employing investors that share a similar mindset, which should ensure continuity in the philosophy. We would prefer their variable compensation to be more closely linked to fund performance, but we still think the team is well motivated to deliver returns for clients.

Like many investment managers, Pyrford has deepened the level of environmental, social and governance (ESG) analysis it carries out in its investment process. We think this framework should enable Pyrford to identify material ESG risks. This doesn’t mean it will automatically exclude companies with perceived ESG issues – Pyrford prefers to consider the wider investment case and use its influence as a shareholder to engage with companies and encourage change.

Cost

This fund has an ongoing annual charge of 0.84%, but we've secured HL clients an ongoing saving of 0.26%. This means you pay a net ongoing charge of 0.58%. Part of this discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies.

Performance

The fund’s official benchmark is RPI + 5%. RPI, or Retail Price Index is a measure of inflation. Since launch, it hasn’t managed to outperform this benchmark, but we think this is a difficult hurdle for a conservative fund.

The fund has delivered some growth since launch though and managed to do it with much lower levels of volatility compared to the broader global stock market, limiting losses in times of hardship. Over this period, the managers have lost money in just one calendar year - 2018. This is an impressive achievement, though it's a reminder that even conservative funds can lose money. Past performance isn’t a guide to the future.

Some of the investments in shares held up well over the last 12 months, including National Grid and BP. National Grid has benefitted from the increased focus on electric vehicles (EV) and is likely to assist in the rollout of an EV charging network. Whereas BP performed well driven largely by the recovery and recent surge in oil prices. On the other hand, some of the portfolio’s investments in bonds performed poorly due to rising yields. When yields rise, bond prices tend to fall.

While the fund’s conservative positioning will limit returns if markets rise, it should cushion against market falls, and we expect the team to remain prepared to capitalise on any opportunities to add risk at more attractive valuation levels.

Past performance is not a guide to the future. Source: Lipper IM to 28/02/2022.

Find out more about Pyrford Global Total Return, including charges

Pyrford Global Total Return Key investor information