Square Mile's funds for 2021
The investment team at Square Mile Investment Consulting & Research reveal the funds they think will reward investors handsomely in 2021.
Fixed Income: Allianz Strategic BondAA Rated
Mike Riddell and Kacper Brzezniak assumed responsibility for this fund in June 2016 and completely revolutionised the way in which it is managed by applying their total return focused, unconstrained and high conviction investment approach, based on global macro analysis and maximises the managers' expertise and experience. We especially like how they harness their complementary skillsets to nimbly capture investment opportunities, with Riddell focusing on the top down macroeconomic analysis while Brzezniak is responsible for the modelling of relative value opportunities across sectors. We hold the fund's managers and their approach in high regard and believe that their abilities are clearly demonstrated by the fact that they have been able to deliver strong returns, with a close to zero correlation to equities, across different market environments.
A feature which provides an excellent element of diversification for portfolios, as it can provide protection, and even positive returns, when equity and credit markets sell off.
Responsible investment: Baillie Gifford Positive Change Responsible A Rated We believe this fund, co-managed by Lee Qian, is currently one of the most attractive responsible-orientated, equity investment offerings in the market.
Baillie Gifford has clearly put a lot of thought, effort and resources into this product. It has a well-defined and distinctive investment process for companies it seeks to invest in and places a strong emphasis on both returns and providing a positive impact over the long run.
As is the case with many other responsible investment funds in the IA Global sector, this fund has a reasonably short track record (launched in January 2017), though we take some comfort from the fact that it has many similarities with other Baillie Gifford strategies, namely the house style of growth investing and the collaborative team-based approach.
As such, the fund is likely to struggle when the value or cyclical areas of the market outperform.
Responsible investment: Baillie Gifford Positive Change (continued)
We would highlight this is a higher risk Non-UCITS Retail Scheme (NURS) fund. The portfolio is fairly concentrated (25 to 50 stocks) and can have some sizeable stock positions.
However, to ensure some diversification, the fund will not hold more than 10% in an individual stock and fund guidelines state it must invest in a minimum of six countries and six investment sectors.
As a result, the fund's positioning and resultant performance profile can substantially differ from its benchmark.
Overall, we believe this fund has the right ingredients to deliver on its stated objectives and is one we think should serve investors well over the long term.
We would highlight this is a higher risk Non-UCITS Retail Scheme (NURS) fund. The portfolio is fairly concentrated (25 to 50 stocks) and can have some sizeable stock positions.
However, to ensure some diversification, the fund will not hold more than 10% in an individual stock and fund guidelines state it must invest in a minimum of six countries and six investment sectors.
As a result, the fund's positioning and resultant performance profile can substantially differ from its benchmark.
Overall, we believe this fund has the right ingredients to deliver on its stated objectives and is one we think should serve investors well over the long term.
UK Equities: Jupiter UK Special SituationsAA Rated
Manager Ben Whitmore is a high conviction, long-term contrarian investor, who has managed money in this style for the vast majority of his lengthy career.
In remaining true to his process, he is prepared to persevere with investments despite the potential for continued underperformance, particularly over the short term.
Stock positioning is determined by conviction, something which is driven by the manager’s view of the quality of the company's underlying business and the attractiveness of its valuation. The final portfolio, which normally consists of between 35 to 45 holdings, is constructed with scant regard for the FTSE All Share index; meaning that it can deviate significantly at the sector level.
Whitmore pays little heed to risk relative to the index, however, and prefers to measure risk simply in terms of the potential loss of investor capital.
For those investors looking for a value focused UK equities fund, this is certainly one that should be considered.
US Equities: Natixis Loomis Sayles US Equity LeadersA Rated
For exposure to the US market, we like this fund, which has benefited from its technology holdings but does not share the same level of stock concentration as the wider market.
It also has an underweight to financial companies, many of which have suffered during the pandemic. Fund manager Aziz Hamzaogullari is highly experienced in volatile markets. His long-term approach is likely well-placed to look past some of the inevitable challenges the US market will face in 2021, through investment into companies he believes can grow regardless of the economic conditions.
Absolute Return: Trium ESG Emissions Impact FundA Rated
There can be little doubt that Responsible investment captured the imagination of investors and became mainstream in 2020.
This is a trend that is here to stay as governments around the world increasingly legislate in recognition of their environmental and social duties. Such regulation will favour companies which are good citizens and do not harm the planet.
In turn, these companies are also likely to be rewarded with higher valuations, and hence higher share prices, by investors.
What could be better, then, than a fund which makes long investments in the saints and simultaneously makes short investments in the sinners?
This is the proposition of the Trium ESG Emissions Impact fund. Although the fund was only launched towards the end of 2019, the strategy had first been incubated and fine-tuned within an internal Trium multi-strategy fund.
Moreover, the fund's manager Joe Mares has been investing in the energy and natural resource sectors since 1997 and in a long/short format since 2007.
Absolute Return: Trium ESG Emissions Impact Fund (continued)
Mares identifies and often engages with companies which have the most to gain from cost-effective improvements in their environmental footprints.
At the same time, he sells short the shares of companies which have poor ESG characteristics.
An added bonus of the fund, at least for investors who may be nervous about the extraordinary ascent of stock markets since the Global Financial Crisis, is that it is managed with very low net market exposure.
Returns should therefore be largely insulated from broad trends in stock markets and are principally driven by stock selection.
Mares identifies and often engages with companies which have the most to gain from cost-effective improvements in their environmental footprints.
At the same time, he sells short the shares of companies which have poor ESG characteristics.
An added bonus of the fund, at least for investors who may be nervous about the extraordinary ascent of stock markets since the Global Financial Crisis, is that it is managed with very low net market exposure.
Returns should therefore be largely insulated from broad trends in stock markets and are principally driven by stock selection.
The investment team at Square Mile Investment Consulting & Research reveal the funds they think will reward investors handsomely in 2021.
The investment team at Square Mile Investment Consulting & Research reveal the funds they think will reward investors handsomely in 2021. The ancient Chinese philosopher Lao Tzu once said: "Those who...
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