64 Saturday June 11 2022 | the times
Money
Slump in Isa investment
I
sa investors poured less than half as
much into funds in April than they
did last year.
The Investment Association (IA)
said that savers invested £683 million
into funds through stocks and shares
Isas, compared with £1.4 billion in April- The total net investment in funds
during “Isa season” of March and April
this year was £934 million, compared
with £1.4 billion last year. March and
April are the busiest times as savers
are prompted to use their £20,000 Isa
allowance before the tax year ends.
In 2019 the total net contribution to
funds during Isa season was £196 mil-
lion while in 2020, at the start of the
pandemic, it was just £11 million.
After a very tricky March, when
more money was taken out of funds
overall (not just through Isas) than was
put in, total net inflows for April were
£553 million. “April’s positive sales
come after one of the most challenging
first quarters for investment in retail
funds on record,” said Miranda Seath
from the IA. That quarter included a
fall in share prices for some of the
US’s biggest firms and Russia’s invasion
of Ukraine, which disrupted supply
chains.
“After the significant volatility of
March, investors returned, tempted by
the tax year-end deadline,” said Emma
Wall from Hargreaves Lansdown.
David BrenchleyAn all-weather portfolio
will ride out this storm
I
nvestors are traditionally divided
into two camps. You’re either a
growth investor or a value one.
If you’re team growth you’re
attempting to buy companies
capable of growing the value of their
shares rapidly; team value are looking
for companies where the share price
is cheap relative to the value of the
business, so you are getting a bargain.When the share price of Tesla, the
ultimate growth stock, boomed,
creating the Teslanaires (people who
had become millionaires thanks to
investing in the electric car company),
some of them mocked the best-
known value investor, the 91-year-old
Warren Buffett, for being a dinosaur
because of Berkshire Hathaway’s
sluggish recent returns.Things are changing, though. So far
this year Tesla is down 40 per cent,
while Berkshire Hathaway is up 4 per
cent. After more than a decade of
growth dominance, it is value’s time
to shine, so stock up, we’re told.
Few analysts see nuance. Maybe
instead of value we should try to find
funds that blend both styles and
provide a good return no matter what
the general market does.
Do this and your portfolio will be a
diversified portfolio — one that, with
a bit of luck, will grow over a long
time horizon. Passive investing is a
good way to have both, and to
diversify your portfolio if either you
don’t know what you’re doing or you
don’t have the time to check. The
MSCI ACWI (all country world
index), for example, comprises the
2,937 largest globally listed
companies, so a fund that tracks this
index has ready-made diversification.
The caveat is that over time the
tracker fund will become more
dominated by either growth or value,
depending on how the companies
perform. The performance of growth
stocks in the last decade meant that a
global tracker had higher weightings
in big tech stocks, because of their
enormous values. So it’s not a
foolproof diversification, but it’s a
start.
Tracker funds are not the only way
to incorporate growth and value. The
Royal London Global Equity Select
fund is one of the few that have
outperformed the MSCI ACWI in
each of the past three years. It has
returned 96.8 per cent since it was
launched in 2018, compared with
48.8 per cent for the MSCI ACWI.
It is, of course, a short time period,
but the fund follows a strategy that
the co-managers Peter Rutter, James
Clarke and Will Kenney have been
using for the past 20 years. During
this time their strategy has
underperformed the global market in
only three calendar years.
The Royal London fund’s top-ten
holdings (which account for half of its
total assets) underline the fact that
Rutter has successfully blended the
value and growth styles to good
effect. He invests in tech firms such as
Microsoft, Amazon and Google, but
also the energy firm Suncor, the
miner Anglo American and the steelmaker Steel Dynamics. “We didn’t
rotate the portfolio and suddenly say,
‘We think growth’s going to roll over.’
We had exposure to growth last year
and we have exposure to value this
year. It’s proper balancing, and trying
not to get sucked into the latest fad,”
Rutter said.
The managers say they are quite
conservative, looking for firms able to
grow their businesses, but only if they
are trading at acceptable valuations.
This means that the fund should
underperform in two circumstances,
Rutter tells me. One is in “rampant
risk-on markets”, when investors are
happy to take as much risk as possible
and are rewarded for that. The second
is when valuations do not matter to
investors — during a stock price
bubble, for instance.
I don’t think that either of those
scenarios are going to be true of the
next few years, when inflation will be
high and investors will be wary of
overvalued stocks, and so I’ve
invested in this fund this week.
I’m not just investing a lump sum
once, my plan is to drip-feed my cash
over the next few years so I can buy
when its value has gone down as well
as up. It seems likely to me that we’ll
see differences in performance, even
within the growth and value styles.
When thinking about my Isa
portfolio, I separate my holdings into
four categories: growth, value,
specialist (stuff like healthcare and
emerging markets) and wealth
preservation.
The Royal London fund doesn’t fit
neatly into any of these categories,
but is closest to wealth preservation.
Until now I’d used wealth
preservation to invest in a range of
assets (equities, bonds and gold) and
it comprised Ruffer Investment
Company and Capital Gearing Trust.
I agree with Rutter that we’re in a
new economic landscape. Ditch those
old allegiances, and embrace the idea
of being both a value and growth
investor. Both have their upsides and
downsides, but own both and there’s
a happy medium to be found.Funds with diversity
Investment return2019 2020 2021 2022100%806040200-20Source: FE fundinfoRoyal London
Global Equity SelectiShares Core
MSCI World ETFDavid
Brenchley
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