And the winner of the Volatility/Absolute Return award is...
1-year return: 6.3%
3-year return: 20.6%
Smith & Williamson Defensive Growth is the inaugural winner of our Best Volatility Focus/Absolute Return fund award – a category that has been introduced for 2019 in recognition of the value that such strategies can bring to a portfolio. Funds that aim to preserve capital in down markets or give a smoother investment journey could really come into their own, given that the 35-year bond bull market has run out of steam and the 10-year long equity bull market is also looking long in the tooth.
In evaluating these sectors, we have taken a slightly different approach. We have focused on the best returns based on three-year volatility. The cohort has been ranked first by how each fund’s volatility compares to peers and we have then picked the best-performing funds among the first and second quartiles.
Smith & Williamson Defensive Growth has produced some of the highest absolute returns with one of the lowest levels of volatility. James Burns has been lead manager since 2012, with Genevra Banszky von-Ambroz becoming co-manager in 2014.
In running the £52 million fund, they aim to achieve steady long-term capital growth by investing at least half of the assets in zero dividend preference shares (ZDPs) and synthetic ‘zeros’. These are a niche yet overlooked form of investment that can offer fixed and relatively low risk returns. The predictability of income they offer makes them well suited to those who need returns at specific times in retirement.
HIGHLY COMMENDED FUND
Newton Multi-Asset Diversified Return is runner-up in this category, with slightly higher three-year absolute returns achieved with a little more volatility. It has a focus on capital preservation and seeks to deliver robust and stable returns from a spread of assets.
The portfolio has at least 120 holdings – more than 150 at present – across a diversified range of assets, from equities and bonds to alternative assets.
With Brexit and US/China trade negotiations still to be resolved, the £209 million fund is cautiously positioned and has a cash weighting of 19% – close to its historical high.
Paul Flood is named on this fund with Bhavin Shah acting as his deputy. Both are a portfolio managers in Newton’s multi-asset team. Like other across Newton, they follow a distinct global thematic framework. Key trends they see shaping the investment landscape include the influence of China and technological advances shifting power to consumers.
High absolute and stable returns with low volatility