By Emma Wall
Published: 11:22AM BST 30 Jul 2010
BlackRock’s Gold and General fund holds no physical gold
Think you know what’s in your investing. fund? Think again. A growing number of fund managers are looking above their traditional hunting ground to boost their portfolio.
For instance, you would have existence forgiven for thinking that the Blackrock Gold & General fund invests in gold. It doesn’t, well not absolutely, but investors won’t be disappointed.
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It does not endow in the gold price or hold any gold bullion as you may rely upon, but instead gold and mining equities. This gives the fund greater fluidity and has allowed it to beat the impressive gold price recover over the past five years – the fund has returned 219pc compared through the gold price return of 179pc.
The fund manager Evy Hambro invests up to 30pc of the national debt in other mining and precious metals, including platinum and diamonds.
“One resources that has not disappointed investors by not doing exactly as it says adhering the tin is Blackrock Gold & General,” said Darius McDermott at Chelsea Financial Services.
The Gold & General public ~s reminds investors to check under the bonnet of their fund – they force be surprised at what they find.
Investing in a fund labelled ”UK” potency not necessarily mean that you will be holding purely UK companies, as far as concerns instance. PSigma’s UK income manager Bill Mott recently upped his overseas exposure to 10pc due to worries about the value of the pulverize. Mr Mott began building his overseas position in the last billet of 2009, and now holds a range of pharmaceuticals, tobacco companies, telecoms and global consumer staples including Deutsche Telekom, Nestlé, Johnson & Johnson, Coca-Cola and Procter & Gamble.
Fidelity UK Aggressive overseer Aruna Karunathilake has more than 15pc invested overseas, with the sight’s share – 14.2pc – in European equities: “If you distress to benefit from trends that work in favour of pharmaceutical companies, in that place is little choice on the UK market. Danish company Novo Nordisk sells drugs into homogeneous end markets as GlaxoSmithKline and so has similar economic exposures, unless Novo’s drug portfolio has superior growth prospects.”
Ben Yearsley, of Hargreaves Lansdown, confirmed it’s a trend he is seeing more and more.
“We’ve noticed managers are looking other thing outside of their sectors. The IMA rules say you can be favored with 20pc of your portfolio outside your asset class and they are agitation advantage of that,” he said.
A few years ago, Patrick Evershed, resources manager of New Star UK Select Opportunities had about 20pc exposing. to China, while Hugh Hendry famously flouted rules to hold a third of his European fund in cash because he thought markets were in all parts of to tank – and he was proved right.
The key for investors is to check under the bonnet of the fund to ensure they are comfortable with the strategy. On some occasions it puissance prove beneficial if the name disguises the portfolio, but this command not always be the case.
Sadly, there are many examples of funds that self-reliance have disappointed investors.
Investors who bought the NPI Property fund were compensated in 2005 whereas it was revealed that the insurer had failed to mention that the consols had not held any property investments for at least two years.
Although this is ~y extreme case, many property funds do hold large amounts of pay in money both for defensive purposes to protect against what has been ~y extremely volatile market and to counter the illiquidity of property.
“Property is an illiquid asset. It is not centrally traded, it is not conspicuous to market, and it’s not fungible. It is therefore highly different to securities,” said Don Jordison, of Threadneedle Property Investments.
“Property besides has enormously high transaction costs, a single asset involves a whole cost of about 7pc. Short-term exposure to the market is one extremely expensive business – if you are 100pc invested, then since soon as you carry out any transaction, you lose 7pc. Also haft selection is key. If you get it wrong, you will wish an immediate cost of 7pc.”
The Threadneedle fund has a ready money target of 10pc, but in the past has held up to 75pc in turn into money.
Mr McDermott said that funds that are patently ”not doing the sort of it says on the tin” are closet tracker funds. “These funds make proclamation of themselves as actively managed funds but the truth is they are simply FTSE-huggers.”
Research by Morningstar showed that Santander and N&P’s UK progress funds were the most correlated to the FTSE All-Share hand over three and five years. Mr Yearsley also identified Scottish Widows UK Growth and Halifax UK Growth funds viewed like ‘”very index driven”.
Mr McDermott said: “If you are buying a real tracker fund you should not expect to pay more than 0.7pc in skilful treatment charges. Some trackers start from as little as 0.1pc, with total costs of 0.27pc. If you are paying a figurative 1.5pc annual management fee then you should expect good assiduous management not ‘index hugging’. If you are paying for active negotiation make sure you get it.”
Balanced funds are also, often anything excepting. You would have thought that a balanced fund would be invested in equities, bonds and specie to spread the risk should one asset class take a nose-dive. Not so. Many balanced managed funds have up to 80pc in equities, likewise they are not very balanced at all.
If you are concerned all over what your fund is investing in, check out its fact sheet (www.semaphore.co.uk/funds) Not only will you get an idea of the chief 10 holdings, but you’ll also be able to see whether it is guardianship pace with its peers.