QROPS ADVICE: Investment News: Spotlight on Cautious Managed Funds

The sustained volatility of equity and bond funds, coupled with poor bank deposit returns, has brought a significant increase in interest around Cautious Managed funds which, as their name suggests, offer investors a medium to low risk exposure to a broad range of assets. In accordance with their constitution (from the UK's Investment Management Association), Cautious Managed funds invest in a range of assets with a maximum equity exposure restricted to 60 percent and at least 30 percent invested in fixed interest and/or cash.
Whilst a variety of emerging market equity funds stormed to the top of the fund performance charts in 2009, it was funds that fell into the Cautious Managed sector that proved one of the most popular in terms of investment inflow, second only to the UK Corporate Bond sector, according to figures recently released by the UK fund supermarket, FundsNetwork. This clearly demonstrates investor's appetite for risk and suggests that whilst the majority are happy to re-enter back into the market via equity related assets, they are seemingly more comfortable doing this with a fund manager bound by the restrictions of staying at least 30 percent invested in fixed interest assets.
Those that chose to invest solely in equity related funds will have reaped some rewards for their risk taking in 2009, with the majority of asset classes returning an impressive, positive result. However, the investment profile of the majority is such that they can ill afford to take the risk of placing all of their investment into equities, and instead rely on the investment expertise of a fund manager that has the experience to finely balance their investment between equities and fixed interest stocks, more so during volatile times. This is evidenced in the fact that the average Cautious Managed fund achieved a 15.6 percent gain in 2009 (source: Lipper, 01/01/2009-31/12/2009), a return that, considering the uncertainty in the markets during the period, would be considered impressive by most.
One of the funds that did particularly well last year, achieving 24.2 percent growth was the Investec Cautious Managed fund (C09, available in both HIL and HEL). Alistair Mundy, the manager of the fund looked forward to 2010, commenting "We believe that the easier money has been made on the most cyclical parts of the UK market, but that a number of shares, while likely to remain volatile, still offer good long term value. We particularly believe that many of the largest stocks in the market remain cheap and that their dividend yields and strong balance sheets make them very attractive. We continue to believe that long bond yields are vulnerable to both higher inflation and increased gilt issuance."