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5 defensive funds for a lengthy eurozone crisis

23 July: After the second Greek election we said we were not out of trouble. With markets reeling today at the prospect of a bailout of Spain we repeat our choice of five funds from Citywire Selection we think should keep you safely invested.

 

View the Citywire Money factsheets on Newton Real Return and Iain Stewart.

Jupiter Absolute Return

Philip Gibbs (pictured) made his name running the Jupiter Financial Opportunities fund, for which he earned the record for holding a Citywire fund manager performance rating for the longest unbroken period (seven years). Gibbs has focused on the Jupiter Absolute Return Fund since its launch in December 2009. It aims to generate an absolute return, irrespective of market conditions, by investing in equities, bonds, currencies and derivatives across the world. Although it got off to a poor start Gibbs’ long-term bearish views were rewarded during the second half of 2011. The £713 million fund’s diversification shows Gibbs is a manager that should not be ignored. From launch to the end of April it gained 2%. In the past 12 months it is up 6.2%. MG.

View the Citywire Money factsheets on Jupiter Absolute Return and Philip Gibbs.

CF Miton Special Situations

Martin Gray (pictured) and James Sullivan are in the curious position of being ‘aggressively defensive’ with their CF Miton Special Situations fund. The defensive side is covered off by maintaining a large allocation to managed cash positions with a high exposure to Asian currencies, with the remainder of the portfolio held in a mixe of other funds, exchange traded funds, bonds and equities. This has paid off over the last five years and despite a weighting to gilts, the pair are wary of the downside risks of government bonds which appreciated nearly 20% in 2011. They currently have small allocations to UK, Japanese and Asian equities however and are looking for markets to fall to lower valuations before bumping up their investment in risk assets. MG.

View the Citywire Money factsheets on CF Miton Special Situations and Martin Gray and James Sullivan.

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12 comments so far. Why not have your say?

Gordon

Jun 18, 2012 at 19:01

I have monies in 4 of these funds (or their unit trust equivalent) though not Jupiter. The one has disappointed me little, though I have only been invested in it for just over a year, is Newton Real Return. Am I being too impatient or has this fund now gone off the boil?.

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ISA23

Jun 18, 2012 at 20:28

almost all these funds are made up of inflation linked bonds plus gold, some high yielding shares, some Japanese stocks and cash. Why not buy M&G inflation linked corporate bond, a gold ETF (or fund) and a good equity income fund yourself and avoid the double management charge??

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invsb

Jun 18, 2012 at 22:26

ISA23. The reason not to do it yourself is that these managers will change the investments depending on the market situation, so you'd have to keep your eye on what they're doing and of course you'd change well after they'd changed. These funds are designed for people who don't follow the markets closely and want a less risky investment approach.

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John Thorley

Jun 19, 2012 at 11:32

Very interesting but after 20 years of being 'in' the markets followed by 5 years of being all but 'out' of the markets I'm still going to wait. The risk is just too high for me at the moment. I still fear a break up of the Euro or at least some countries having to leave and that will be messy, very messy!

I really don't see any credible long term solutions to the current economic crisis coming from our political leaders. They appear to be a little clueless as to what exactly to do. It might be just ok in the end but then again...

These funds are defensive and they may preserve your capital if all does go pair shaped but why take the risk?

You can maintain your cash against inflation returning 3-5%pa in long term deposit accounts if you shop around. I don't think now is a good time to be greedy.

Stock and shares ISA's are a really bad idea because you never want to sell then for fear of losing the tax shelter but by it's very nature, investment in stocks and shares is all about getting in and out at the right time.

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Daniel Mueller

Jun 19, 2012 at 21:03

Why are all those managers "looking for markets to fall to lower valuations before bumping up"? Seems like everyone is eagerly waiting for an entry into risk assets these days.

IMO this attitude has the effect of putting a floor under risk assets.

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Brian Richards

Jun 24, 2012 at 17:45

You should see the latest report on Funds from Which Mag, better to buy IT,s

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James Keble

Jul 23, 2012 at 17:40

Re the comment that stocks and shares ISAs are a really bad idea, one can always take out a choose your own shares version with a stockbrokers so there is no danger of losing the tax shelter when selling. Mind you, you have to be a better stock picker than I have been.

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RL

Jul 23, 2012 at 18:41

John Thorley you couldn't be more wrong. You say that 'investing in stocks and shares is all about getting in and out at the right time'. That is a recipe for disaster. If you were right Mr Thorley and followed your own advice you would be so rich you wouldn't be reading these columns!

Buying and selling like that is pure speculation. Eventually you will get your timing wrong and get thumped. Investing is about picking the right stocks and holding them as their earnings improve. If you do that the capital gain will, in the medium term, look after itself. Just look at the returns of a stock like Pearson through these difficult times. Up over 50% over 5 years and still yielding over 3%.... It doesn't take a genius to buy and hold good stocks...

Given the inflation risk and banking system credit risks around cash is in fact more risky (and lower yield) than many decent shares.

Cash yields of 3-5% are risky. You don't get that for no risk. Remember the Icelandic Banks.

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Gone for a Cuppa

Jul 23, 2012 at 19:14

Europe will right itself at the end of 5 years say, so how about a little monthly savings plan to sleep better at night ?

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John Thorley

Jul 23, 2012 at 22:08

RL are you an IFA per chance? Buy now, buy now, buy now, now now now, in fact never have I been to see any IFA at any time who said you know what? I wounldn't buy in just at the moment. In July 2008 an IFA said gosh what you doing with all that cash in the bank, I'ld buy one of my equity funds if I were you. Good job I ignored him.

If you think timing is of no import then you would put every penny into equity as soon as you earned it. Consider this if you put all your money into equity in the summer of 2000 across the FTSE 100 you now, 12 years later, would have less than you started with! So in real terms you would have lost loads. If, you invested in October 2002 and sold in March 2008, not quite the bottom and top but still you would have done very ncely thank you very much.

Putting money in the markets and just leaving it there is what the IFA's want so that they get years and years of trail commissions. The clever money will move in and out and eat your money for breakfast.

Finally, if the 3-5% offered by UK banks for time deposits backed by the FSCS is risky and doesn't pay back at the end of the term you really needn't worry about your money because you'll be more worried about where your next meal is coming from!

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RL

Jul 24, 2012 at 10:52

John Thorley, no I'm not an IFA, far from it. I agree about trail fees. There's another scandalous shoe to drop.

No, I Have a bee in my bonnet about terminology. No one should think that holding a share for less than 3 years is investing. It is not. It's speculation as over lesser periods the market is the most important factor in returns. Nothing wrong with speculating, but just don't call it investing.

I did not suggest investing in funds, though there are a (very) few excellent ones around. I suggest a basket of first class stocks.

Not much in that for the IFA, nor did I suggest buy buy buy.

As for FSCS I agree that is pragmatic in the short term, but if you ever have to rely on that you will be blown away by inflation.

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John Thorley

Jul 24, 2012 at 15:19

RL, funnily enough I think we sort of agree on something here.

The article seemed to show that you can still invest in some funds even if all goes even more pair shaped across Europe. Of course this is true, some shares and some funds will always do well, or at least not too badly in a falling market. However, picking the right ones is getting increasingly difficult and to my mind is now so difficult that it's not worth the risk.

For sure, if your after tax return on cash is less than inflation you are losing out in real terms but if you pick a fund or a share that is falling in absolute terms aswell then you are losing out even more so.

I think that too much emphasis is put on the real term losses that cash may be subject to in comparison to the risk associated with even medium or long term investment in equity as we stare down the barrel of a catastrophic collapse of the Euro. I think this is used as a weapon to beat unsuspecting people with savings into taking on higher levels of risk so that banks, IFA, FAs, fund managers and the like can claim their fees and commissions.

Fair enough if you are used to investments and all that goes with them carry on you're used to the ups and downs and you can all decide what risk you want to take, but every time you go into a bank now the teller almost always asks 'would you like an appointment with our financial advisor, they are very good you know?' From the point of view of an unsuspecting client who doesn't know exactly what's happening right now it's unfair and wrong.

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  • Trojan O Inc
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  • Newton Real Return GBP Inc
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  • Jupiter Absolute Return Acc
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  • CF Miton Special Situations Portfolio Ret A Acc
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  • Jupiter Financial Opportunities
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  • Martin Gray
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  • Iain Stewart
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  • James Sullivan
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