Funds we invest in

Each of our portfolios is constructed using a blend of different funds covering a range of asset classes, industries and geographies. These provide you with a high level of diversification and the best chance of achieving optimum returns for the amount of risk you are willing to accept.

Our core portfolios are constructed from passively managed index funds. These are low-cost investment vehicles, which cost investors as little as 0.06% of the amount invested. Our dynamic portfolios introduce some active managed funds too, which aim to outperform their benchmarks. These funds have a higher annual cost due to the active management involved.

You can see the list of funds we currently select from below.

UK EQUITIES

Shares in companies listed on the UK stock exchanges.


This fund aims to track the performance of the FTSE All Share, an index comprising the leading companies by market capitalisation listed on the London Stock Exchange.

Why did we pick it?
The UK market is well-diversified and gives access to a broad range of sectors and companies. Companies listed in the UK also have good exposure to overseas growth opportunities. For an investor whose liabilities and earnings are denominated in sterling, companies listed on the FTSE should make up the majority of his or her equity investments.

This fund offers broad exposure to the UK equity market. It seeks to track the performance of the FTSE All Share, an index comprising the leading companies by market capitalisation listed on the London Stock Exchange.

Why did we pick it?
We are using two UK equity trackers in the higher risk portfolios so that investors do not have too much exposure to a single fund. Vanguard is one of the world’s leading providers of low-cost indexing solutions and their UK equity tracker is a sound choice for the Flying Colours portfolios.

This is an actively managed UK equity fund which aims to generate total returns in excess of the FTSE All-Share index over the long term.

It is managed by four dedicated UK equity specialists, who each run a section of the portfolio independently of each other. One of the managers – Richard Staveley – focuses on the smaller companies market, while the remaining three invest across the universe of listed UK stocks.

Why did we pick it?
The fund has a truly outstanding track record since its launch in 2003, having more than doubled the return of the FTSE All-Share index since inception. In addition, it has outperformed in a remarkably consistent manner, beating the return of the FTSE All Share in nine of the last ten calendar years.

The managers have built a portfolio with a value style bias, investing in stocks that they believe are trading below their true worth. As a result, the fund is currently investing around 15% of its assets in stocks listed in Europe, close to the fund’s limit of 20% international exposure.

This is an actively managed UK equity fund which aims to generate total returns in excess of the FTSE All-Share index over the long term. The fund also has an income objective, aiming to deliver a yield 10% higher than that of the FTSE All Share.

It is a recent launch from the boutique fund group Woodford Investment Management, founded by one of the UK’s most highly regarded fund managers, Neil Woodford.

Why did we pick it?
Woodford was lead manager of Invesco Perpetual Income and High Income from the late 1980s, building up an extremely strong track record and large investor base during his tenure.

The new fund adopts the same investment approach, focusing on the long term and investing in quality companies that can deliver sustainable dividend growth. The fund makes an excellent complement to the Majedie fund in the Flying Colours active portfolios.

This is an actively managed UK equity fund which invests primarily in a portfolio of medium sized companies. The portfolio is benchmarked against the FTSE 250, an index which comprises the 101st to 350th largest firms listed on the London Stock Exchange and typically at least 80% of the fund’s assets will be held in FTSE 250 firms.

The fund is managed by Richard Watts, who is an integral member of Old Mutual’s respected UK equity division.

Why did we pick it?
Use of a dedicated mid-cap fund is an attractive way of delivering excess returns for clients as mid-cap stocks have shown strong outperformance over large-caps over all timeframes. There are a number of reasons for this – such as the superior earnings growth delivered by mid-caps and the fact that fewer analysts cover the stocks.

In addition, the Old Mutual fund has delivered excellent outperformance of the FTSE 250 under Watt’s tenure.


OVERSEAS EQUITIES

Shares in companies listed on stock exchanges outside the UK.


This fund aims to track the performance of the S&P 500, an index of the 500 leading companies listed in the US.

Why did we pick it?
The US equity market offers investors access to some of the largest and most successful companies in the world, and also the US dollar, which is the reserve currency of the world. With a weight of more than 50% in the main global equity indices, US equities should form a core part of your portfolio. The Fidelity tracker is an established, low-cost way of gaining exposure.

This fund offers broad exposure to the Continental European equity market. It aims to track the performance of the MSCI Europe ex UK index, which includes large and mid-cap companies across 14 markets in Europe.

Why did we pick it?
Europe is a key trading partner of the UK and our histories and economies are inextricably linked. The fund offers exposure to the key Eurozone markets, such as Germany, France and Italy, as well as other European markets, such as the Nordics and Switzerland.

This fund aims to track the performance of the MSCI Japan index, which captures large and mid-cap segments of the Japanese market.

Why did we pick it?
Under Prime Minister Shinzo Abe, Japan is enjoying a resurgence in fortunes in terms of its economy and stock market performance. The Japanese equity market also tends to move more independently to other equity markets, meaning it helps with portfolio diversification.

This fund offers broad exposure to the developed Asian equity market. It aims to track the performance of the MSCI Pacific ex Japan index, which captures large and mid-cap companies of four developed markets in the Pacific region – Australia, Hong Kong, Singapore and New Zealand.

Why did we pick it?
Developed Asian markets provide exposure to the key markets of Hong Kong – which is a gateway into the Chinese markets – and Australia – where banking and mining/energy stocks dominate.

This fund aims to track the performance of the MSCI Emerging Market index, which captures large and mid-cap companies across 23 emerging market countries.

Why did we pick it?
Emerging market countries are those with developing status rather than developed. An investor is likely to generate higher returns from emerging markets relative to developed markets but with higher risk. They include some of the fastest growing economies in the world, such as China, India, Brazil and Mexico.

This is an actively managed Asian equity fund which seeks to consistently outperform the MSCI AC Asia Pacific ex Japan index. The Fund also seeks to invest in companies that are expected to benefit from Chinese economic growth and development.

Why did we pick it?
The fund is managed by Greg Kuhnert, who joined Investec in 1999 and took the helm in 2005. Kuhnert uses a model called ‘4Factor’ which is a screening tool designed by Investec to assist with stock selection. It has proven its worth and is an excellent way to make stock comparisons across countries and industries.

Geographic and sector allocations are managed fairly tightly to the benchmark, ensuring the fund’s returns do not deviate too significantly from the index and have been consistently strong across under Kuhnert’s tenure.


UK FIXED INCOME

Investments that provide a return in the form of fixed periodic payments. They are viewed as low to very low risk.


This fund gives the investor broad exposure to sterling denominated, UK government bonds, also known as gilts. It aims to track the performance of the FTSE Actuaries UK Conventional Gilts All Stocks Index, which comprises gilts with all outstanding maturities.

Why did we pick it?
Gilts are one of the safest bond investments in the world and rated AAA by the credit ratings agency S&P, the highest rating given to sovereign debt. No UK government has ever missed an interest payment or failed to repay the principal at maturity.

UK government bonds also exhibit very low correlation with more risky asset classes and, as such, tend to rise in value when equity markets are falling. They are therefore useful in achieving diversification.

This fund provides exposure to the UK investment grade bond market, excluding government bonds. It aims to track the performance of the Markit iBoxx GBP Non-Gilts Overall TR Index, which comprises sterling debt securities issued by government agencies, companies and supranationals.

Why did we pick it?
Corporate bonds are issued by companies rather than governments and offer investors a higher yield with only a modest increase in risk. The companies originate from a range of developed market countries, but all the bonds are sterling issued so the investor bears no currency risk. Higher quality investment grade credit is used to achieve diversification from equities.

This fund aims to track the performance of the Barclays Global Aggregate U.K. Non-Government Float Adjusted Bond Index, which comprises sterling debt securities issued by government agencies, companies and supranationals.

Why did we pick it?
Like the Blackrock Corporate Bond Tracker, the Vanguard UK Investment Grade Bond Index fund provides a cost-efficient way of investing in UK corporate debt. The portfolio is included to limit our investors’ exposure to a single fund.


GLOBAL FIXED INCOME

Investments that provide a return in the form of fixed periodic payments. They are viewed as low to very low risk.


This fund gives broad exposure to the global government bond market. It aims to track the performance of the JP Morgan Global Government Bond Index ex UK Index, which comprises fixed income securities issued by governments outside the UK.

Why did we pick it?
Like UK government bonds, global government bonds can help protect capital in times of market stress. The bias to US government debt – nearly half of the fund – also brings US dollar exposure to our models and added diversification benefits.

This fund delivers broad exposure to the global corporate bond market. It aims to track the performance of the Barclays Global Aggregate Corporate ex-GBP Index, which comprises fixed income securities issued by companies in global markets, excluding issues denominated in pounds sterling.

Why did we pick it?
Overseas corporate bonds offer investors a slightly higher yield to overseas government bonds for only a modest increase in risk. US dollar exposure is more than 50% of the portfolio, bringing excellent diversification benefits for a UK investor.

This is an actively managed global bond fund which invests in debt securities listed or traded anywhere in the world, including emerging market countries. It is managed by a global bond specialist, Brandywine Asset Management, which is based in Pennsylvania, USA.

Why did we pick it?
The firm employs a contrarian value investment approach, taking high conviction positions in the debt and currencies of countries offering investors the highest real yields. The majority of the fund is invested in government bonds, but the managers have the flexibility to invest in corporate bonds as well.

This is a mirror of a long-standing US domiciled fund which is Brandywine’s flagship strategy and has been running for more than 20 years. During that time it has shown to be able outperform global bond indices and peers, and we hold the fund in high regard.

This actively managed global bond fund seeks to capitalise on fixed income opportunities around the world, including those issued in emerging markets.

Why did we pick it?
The fund is one of the largest and most successful in the world, and has thrived under the management of Dr Michael Hasenstab and his large team of analysts and fund managers.

His investment approach is long-term, fundamental and research-driven with a focus on finding the best opportunities, no matter where they are based. For example, the fund is heavily invested in South Korea and Mexican debt, and also has short currency positions in the Euro and Japanese Yen, which means the fund will benefit if those currencies fall in value.

Its flexible and long-term investment remit means performance can diverge significantly from its index and peers but the fund has demonstrated strong outperformance since launch.

ALTERNATIVES



This is an actively managed fund that invests directly in UK commercial property. The property investments tend to be shops, retail warehouses, office blocks, shopping centres or industrial units, situated across Great Britain and Northern Ireland. The majority of the long-term return from commercial property (around 70%) comes from rental income.

Why did we pick it?
M&G Property Portfolio is well-diversified by geography, sector and tenant type and as one of the larger funds open to retail investors, invests in a wide variety of lot sizes.The fund boasts a vacancy rate that is lower than the wider UK market, a longer-than-average lease length, and is managed by an experienced team, headed by Fiona Rowley.