CAUTIOUS OPTION
James Davies, investment research manager at Chartwell Investment Management, suggests a broadly based portfolio for those who want to limit risks. Insight Diversified Target Return (DTR) is ranked fifth out of 96 funds in the IMA Cautious Managed sector over one year to 31 December 2007.

It has returned 3.27 per cent compared to a 3.14 per cent sector average.
Says Davies, ‘The DTR fund’s objective is to deliver positive returns annually, with longer-term performance commensurate with that of equities as a whole. To do this, they believe the fund should be truly diversified across asset classes, so it invests in a wide range of assets and has a particular exposure to funds that aim to achieve absolute return.

As with other multi-asset funds, it has exposure to equities, fixed interest, commercial property, private equity, currency and commodities. ‘The fund’s asset allocation has no constraints, but in-house controls allow a maximum of 30 per cent exposure to equities. The fund aims to be less volatile than other funds, an objective it achieves. In troubled times, the fund offers a steady performance. 2007 saw the FTSE 100 rise by 5.8 per cent on a total return basis, whereas DTR delivered 6.8 per cent.’

DTR has an initial charge of 4.0 per cent and an annual management fee of 1.5 per cent.

BALANCED OPTION
John Monaghan, discretionary investment manager at Origen, opts for an actively managed fund for investors seeking a balanced approach. Newton Managed is ranked 18th out of 61 funds in the IMA Active Managed sector over three years to 31 December 2007. Over the period it has returned 52.67 per cent, compared to a sector average of 41.21 per cent.

He says, ‘If you are taking a balanced approach, you want something that is not going to take too many risks but that also has sufficient market exposure to generate performance. Newton Managed has delivered tremendous performance over just about all periods of time. It is managed by Nick Clay, who combines both a top-down, macroeconomic view to determine the core of his portfolio, with careful stock selection to provide a level of outperformance.

‘He has a wide investment brief, with an objective of generating capital growth and income from an internationally diversified portfolio. The UK accounts for just under half of the portfolio, with major holdings spread across some typical UK FTSE 100 blue-chip names. But it also has around 16.5 per cent in Europe and just over ten per cent in the US, as well as some smaller exposure to Asia Pacific, Japan and Latin America. So you get a well-diversified portfolio with a track record of consistent returns.’

Newton Managed has an initial charge of 4.0 per cent and an annual management fee of 1.5 per cent.

AGGRESSIVE OPTION
Martyn Ingram of Independent Portfolio Managers suggests it is time for more adventurous investors to take a look at mid-caps. Old Mutual UK Select Mid Cap is ranked second out of 262 funds in the IMA UK All Companies sector over three years to 31 December 2007. Over the period, it has returned 71.66 per cent compared to a sector average of 38.77 per cent.

He says, ‘You can probably view putting any money into the UK stock market at the moment as an aggressive move, but I think it is probably time to dip your toes back into the UK and look at the mid-cap area in particular. Anything outside the blue-chips
suffered quite badly last year, which suggests that there is considerable scope for recovery. Mid-caps in particular were a difficult place to invest, but if you are going to be putting your money with anyone in that space then you should put it with Ashton Bradbury, who has run the Old Mutual UK Select Mid Cap fund since its launch in 2002.’

He adds, ‘Although it has been a volatile area, its performance numbers have been consistently good. Bradbury knows his area of the market inside out and is not afraid to actively manage the portfolio. There should be value to be had in mid-caps after their poor run, and he is just the man to find it.’

Old Mutual UK Select Mid Cap has an initial charge of four per cent and an annual management fee of 1.5 per cent.