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Three funds to pick if you fear the worst

Three funds to pick if you fear the worst following Trump's election victory.

Preparing for the worst?

Three defensive mixed asset managers backing gold and other investments for a rainy day.

Other than Donald Trump the other major winner from the day is Gold. The yellow metal rose as much as 4% in the early hours of Wednesday when the result started to become clear, reaching a peak of $1,336 per troy ounce. Those gains have been pared back to 2.6% at the time of writing or $1,306 per troy ounce.

Gold is the definitive safe haven asset and invariably does well at times of stress. It has not just been a good day for gold, but a vintage year in which both the value of the underlying metal and the companies which mine and refine the element have done extremely well. It’s not uncommon to see dedicated gold equity funds up some 100%, while the gold price has risen nearly 25%.

While the UK market reaction has been fairly muted to the election result the big winners are unquestionably gold miners with Fresnillo PLC, the Mexican gold producer, the FTSE’s top gainer today at 9.6%. While Randgold Resources isn’t far behind with 7.2% gain on the day. Australia’s Newcrest Mining, Asia Pacific’s largest gold producer, also finished trading having leapt 9.8%.

Outside of dedicated gold funds mixed asset managers are those most inclined to keep a sleeve of their assets tied up gold and gold equities. Here are three managers who have been betting big on gold for some time, all of which are in Citywire Selection. It’s worth bearing in mind that prior to 2015 gold hasn’t been a popular investment, so all have suffered over the medium term.

Preparing for the worst?

Three defensive mixed asset managers backing gold and other investments for a rainy day.

Other than Donald Trump the other major winner from the day is Gold. The yellow metal rose as much as 4% in the early hours of Wednesday when the result started to become clear, reaching a peak of $1,336 per troy ounce. Those gains have been pared back to 2.6% at the time of writing or $1,306 per troy ounce.

Gold is the definitive safe haven asset and invariably does well at times of stress. It has not just been a good day for gold, but a vintage year in which both the value of the underlying metal and the companies which mine and refine the element have done extremely well. It’s not uncommon to see dedicated gold equity funds up some 100%, while the gold price has risen nearly 25%.

While the UK market reaction has been fairly muted to the election result the big winners are unquestionably gold miners with Fresnillo PLC, the Mexican gold producer, the FTSE’s top gainer today at 9.6%. While Randgold Resources isn’t far behind with 7.2% gain on the day. Australia’s Newcrest Mining, Asia Pacific’s largest gold producer, also finished trading having leapt 9.8%.

Outside of dedicated gold funds mixed asset managers are those most inclined to keep a sleeve of their assets tied up gold and gold equities. Here are three managers who have been betting big on gold for some time, all of which are in Citywire Selection. It’s worth bearing in mind that prior to 2015 gold hasn’t been a popular investment, so all have suffered over the medium term.

Sebastian Lyon, Troy Trojan

First up is Sebastian Lyon who has been manager of Troy’s £3.4bn Trojan Fund income fund for more than 15 years. While Lyon’s long-term performance is outstanding, his decision to have large exposure to both gold and cash has been costly at times.

With both equities and bonds extending their bull runs this ultra-defensive positioning has led to periods of underperformance; over five years until the end of October the fund has returned 27.1% compared to the IA Flexible Investment sector average of 49.2% and FTSE All Share’s 57.4% gain. Even so the fund has outperformed the FTSE All Share over one and three years returning 12.2% and 23.7% respectively.

His total exposure to physical gold is 10.2% of the portfolio which he accesses through two exchange traded funds ETFS Gold Bullion Securities (7.8%) and ETFS Physical Gold (2.4%). In comparison his exposure to gold equities is modest at just 1% of the fund. But with over 30% of the fund in cash this is one very defensive minded manager.

Steve Russell & David Ballance, CF Ruffer Total Return

Ruffer is another portfolio in a similar position. The fund and its managers Steve Russell (pictured) and David Ballancehave outstanding longer-term track records but recent years haven’t been too kind to their bearish dispositions.

The fund has around 6% of the assets in gold and gold equities. When coupled with a 44% stake in index linked gilts to protect against rising inflation and 14% in Japan, which took the brunt of the election result falling 5.4%, makes this a very risk averse investment.

In 2016 the fund has returned 12.8% to investors compared with to the 10% deliver by the IA Mixed Investment 20-60% Shares sector average.

Alastair Mundy, Investec Cautious Managed

Until about three years ago Alastair Mundy’s contrarian value approach on the £2 billion Investec Cautious Managed could do no wrong.

However, as with the other picks on this list his defensive mind-set fell out of favour. The run was fuelled in part due to his allocation to precious metals. In total his currently exposure to physical gold and silver stands at 11%, in addition to the 3.6% weighting towards gold and silver miners.

He takes his defensiveness one step further with a short on the S&P 500 to the tune of 25% of the portfolio. This is in tandem with a 13.5% allocation to select US equities, bringing his net exposure to US equities to -9.7% of the fund’s value. Mundy has also long been a fan of Japan maintaining a position of around 10% of the fund for many years. In 2016 the fund has returned 16% till the end of October compared with the 10% gain made by the IA Mixed Investment 20-60% Shares sector average.

Related Fund Managers

Sebastian Lyon
Sebastian Lyon
1/41 in Mixed Assets - Absolute Return GBP (Performance over 3 years) Average Total Return: 26.96%
David Ballance
David Ballance
6/41 in Mixed Assets - Absolute Return GBP (Performance over 3 years) Average Total Return: 20.48%
Alastair Mundy
Alastair Mundy
13/41 in Mixed Assets - Absolute Return GBP (Performance over 3 years) Average Total Return: 17.26%
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