Dominic Cooke 11 March 2019
Anti-lock brake systems, or ABS, come standard in cars these days. When you brake heavily, ABS keeps the wheels moving and gives you a chance to steer clear of danger, while the car slows down.
Without ABS, your wheels would lock, you’d skid out of control, and have no way of changing course.
HL Multi-Manager Strategic Assets was designed in ABS’s mould. A lot of the time you’re not sure why you need it, then all of a sudden, you’re extremely grateful you’ve still got it.
Over the long term, markets rise, but every now and again they deliver a nasty surprise. That can have two damaging effects.
First, the thought of a nasty surprise can stop you from investing, which hurts your long-term wealth potential. Second, when something bad happens, you panic and sell at the worst possible time.
The HL Multi-Manager Strategic Assets fund aims to eliminate both of these dangers.
It does this by treading carefully when the market’s rising, which can make it look lacklustre and have you questioning why it’s in your portfolio. But to provide shelter when a storm arrives, you’ve got to take some precautions when the sun’s still shining.
So far, HL Multi-Manager Strategic Assets is doing its job. In months where the stock market’s fallen, the fund’s fallen less. And when the market’s risen, the fund’s risen by less. But remember, past performance isn’t a guide to future returns.
Relative performance against the UK stock market
Past performance isn't a guide to future returns Source: HL to 28/2/19.
Overall this has translated into a total return, after the fund’s charge, of 12%* since launch in February 2016. With hindsight, the fund could’ve delivered higher returns if we’d invested more money in shares. But that misses the point and the three years we’ve just been through are a good example of why.
A few months after February 2016 we learnt about the EU referendum. A few more months later we learnt the Brexit result. And since then, we’ve learnt little else. Uncertainty has been the dominant force, which has understandably pushed many investors onto the side-lines into cash.
The point of HL Multi-Manager Strategic Assets is that 12% is better than 1%, which is roughly what cash would’ve earned in a bank. Although it must be said that investments, unlike cash, rise and fall in value, so there’s still a chance you could get back less than you invest.
This fund is designed to give you confidence to invest in the stock market because over the long-term it’s a force for good but over the short-term it’s unpredictable and stress inducing. We look after the short-term so you can enjoy the long-term benefits.
Managing the short-term
Despite the political drama we didn’t make any major changes to the portfolio over the past year. We still have a core exposure to asset allocators like Newton Real Return, Pyrford Global Total Return, Troy Trojan and Artemis Strategic Assets. These funds have flexibility to allocate between shares, bonds, cash, currencies and commodities.
At the moment they think shares are overvalued so they have less invested in stock markets, taking the view they’d rather miss out on shorter-term gains in order to provide better shelter when the clouds roll in. At that point, they’d look to add to shares at better valuations.
It’s meant their returns have been subdued recently because, in general, stock markets have done well. But our asset allocators have many years of experience between them, not to mention very strong track records, so we’re comfortable for their funds to remain at the core of ours.
Alongside them, we invest in funds which are designed to take advantage of a particular opportunity – like good value in Asian shares or higher-risk smaller companies. In this part of the portfolio, Stewart Investors Asia Pacific Leaders and Merian UK Dyanamic Equity have provided a helpful performance kicker, up 45% and 44%* respectively since launch.
In the third ‘bucket’ of our fund, we invest in pure bond funds which offer us another source of shelter and extra diversification. Our holdings in M&G UK Inflation Linked Corporate Bond and Invesco Tactical Bond have returned around 11% and 5%* respectively since February 2016 but we expect these funds to show their worth in times of market stress. The fund can also invest in higher-risk high-yield bonds.
Importantly, while there were no headline changes, we continued to rebalance between these positions, recycling money from good recent performers to bad ones, so the fund stays balanced and well-placed to deliver returns in all weather conditions.
Whether we end up with a Brexit storm, it blows over or is forecast for later in the season remains to be seen. In that regard, this month is likely to be important. But think back to February 2016. At that time, if you’d predicted everything that would unfold – Brexit, a snap election, a Trump White House, a global trade war and more – you’d have run for the hills, only to miss out on money the market’s made.
No month or event is more important than the stock market’s foundations, which is built of people and companies serving other people and companies in a bid to make money. That tide is stronger than any one wave and we hope the HL Multi-Manager Strategic Assets fund can give you confidence to ride with it. We think the added benefits of a multi-manager approach justify the higher charges.
This article isn’t personal advice. If you’re not sure if an investment is right for you, we can put you in touch with an adviser.
This fund is managed by our sister company, HL Fund Managers Ltd.
|Annual percentage growth|
Feb 14 -
Feb 15 -
Feb 16 -
Feb 17 -
Feb 18 -
|HL Multi-Manager Strategic Assets||N/A*||N/A*||9.4%||-0.5%||-0.5%|
|Invesco Tactical Bond||4.7%||-2.2%||4.7%||1.2%||-1.6%|
|M&G UK Inflation Linked Corporate Bond||-0.9%||-4.7%||8.2%||1.3%||0.0%|
|Merian UK Dynamic Equity||2.0%||9.8%||26.7%||19.7%||-11.5%|
|Stewart Investors Asia Pacific Leaders||29.3%||-4.6%||26.1%||5.5%||2.9%|
|Bank of England Base Rate||0.5%||0.5%||0.4%||0.3%||0.6%|
Past performance is not a guide to the future. Source; Lipper IM* to 28 February 2019.
N/A= There’s no past performance data because the fund launched after this date.