unit trust/oeic

Midass

I'm thinking of selling 'Schroder UK Dynamic Smaller Co A' trust (poor return since Cazenove went over to Schroder last year).
I am considering replacing it with 'Old Mutual North American Equity R'. I would prefer my replacement to be outside of the UK.

Does anyone have any direct experience with this fund?
What are your thoughts?

dunstonh

I am considering replacing it with 'Old Mutual North American Equity R'. I would prefer my replacement to be outside of the UK.

How does it fit in with your wider portfolio? (these types of funds are not really there to be held in isolation but as part of a wider diverse portfolio)

Ryan_Futuristics

Well US equities have just surpassed their 2007 high in terms of valuation (i.e. they *could* be described as pre-crash levels)

An excel spreadsheet with the current data
http://t.co/XbP0eZ2TA7

It's basically very low (artificially low) interest rates on other forms of savings that are keeping them there ... Whether this situation persists another year, or even 5 years, it's a long way down if you make the wrong call

The problem with UK smaller cos is they had a strong run since the crash, and valuations ran a bit high

Some people don't like making any predictions at all - because they don't trust that anyone can know anything with certainty - but at the same time, choosing to switch from one sector to another is a decision ... And a decision without perspective is just a guess

I'd most likely stick tight (and ride out the rough bits - which you'll always get with smaller cos)

bowlhead99

I would say the 'poor return since Cazenove went over to Schroder' is a bit of a red herring ; the UK smaller companies sector is down in general. It has fallen more than the average in its sector, but it had much further to fall because it had risen so much more than the average in its sector, previously.

For example, in the two years from March '12 to March '14, it went up almost exactly 100% while the average UK smaller companies fund went up only 60%. So with that fund your £100 grew over only two years to have £200 in the pot instead of £160 for the sector average, before the smaller companies sector started dropping. Now after a down period you have £170 in the pot instead of £150 in the sector average pot.

It is 51st out of 53 funds in the league table for the last year for that type of fund which looks pretty bad... however it's 9th out of 51 for the last 3 years as a whole, definitely a top tier fund if you consider medium term performance. The truth is, it is pretty impossible to build a fund that will make the most in the good times and also lose the least in the bad times.

I don't have any direct experience with the OM fund you mention, but you don't really need 'direct experience' when you can chart its performance since 1995 on trustnet.com or similar. It seems to have a reasonable historic return and its current top 10 holdings aren't particularly wacky (while being quite different from the S&P500 top 10, so you can see they are doing proper active management of the portfolio).

One observation is that the fund rose faster than the average north american fund from 2003 to 2007 and then during the credit crunch fell further to go back to pretty much the same level as the average in early 2009. It has recently outperformed again for the last 3 years. However, perhaps this is what you saw with your UK fund, outperforming in the strong bull market and then falling faster than the others in a downturn - which leads me to wonder whether if you just pile into this bandwagon for a change of scenery are you not going to be moaning about a poor return in a year's time?

A fundamental question is what you already have in the rest of your portfolio and how this fund fits in. It would seem strange that a highly specialist UK small companies fund gets replaced with an international single country large companies fund, unless your portfolio was very badly set up in the first place and you are now trying to give it some balance.

If you already have a lot of funds in the UK perhaps that is why you want to have this replacement to be outside of the UK. But without any insight to what other non-UK funds you have (Europe, Asia, Japan, emerging markets etc etc) it's impossible to say whether you should just pile into this north american fund rather than a more balanced 'global ex-UK' fund that covers more regions.

If all you are doing is picking funds by seeing what has gone up the most in the last X years, that is probably a poor way to select investments, given that economies move in cycles and this year's winners may be the big losers over the next few years. Some people would say US companies have had too good a time of it and the funds that specialise in the US are doomed to give much lower returns going forward. But that is speculation really and nobody knows the future.

What you should do, if you don't know where the market is going next, is have a bit of everything and when some funds get cheaper sell the ones that got more expensive to buy more of the cheap ones. It is not hard to get a bit of everything, but you either need to do it with a couple of general global funds or lots of individual specialist funds to cover different regions (UK / US / Asia / Europe / EM) or industries (financial services, pharma, resources, technology, consumer etc) or types of company (small, large, value, growth) or types of asset (shares / bonds).

As all we know about you is that you are exchanging one specialist fund for another specialist fund, perhaps you are in the latter camp of using lots of specialist funds. But if you don't think you are, or worse still, if this is your only investment, perhaps you need a wider rethink than 'does anyone have experience with this fund'.

Midass

dunstonh wrote: »

How does it fit in with your wider portfolio? (these types of funds are not really there to be held in isolation but as part of a wider diverse portfolio)

Thanks. I have quite a wide selection, mostly UK equities, hence I didn't want another UK trust that would merely buy into the same companies that I am already in.

dunstonh

Midass wrote: »

Thanks. I have quite a wide selection, mostly UK equities, hence I didn't want another UK trust that would merely buy into the same companies that I am already in.

Do you have any structure to your portfolio or is it a random selection?

e.g. x% in Japan, y% in US equity, z% in European equity etc.

Its just that going from UK to US isnt what you would expect unless its part of a rebalance of a portfolio or the asset allocations have changed to reflect the phase we are in regarding the economic cycle.

Midass

I hold about 20 different funds, mostly UK. This fund was the only one to go 'red' this year and was down every quarter ending the year at -8.81%

Midass

Dunstonh
I no longer use a f/a although a fair part of my portfolio was f/a based. I now moniter it myself and it has served me pretty well. I choose a mid road risk and I invest for income and growth.
I think it's fairly well balanced although heavily UK weighted with about 10% non UK. Using morning star ratings, mostly large to medium size companies with a blend of income/growth 50/50

bowlhead99

With that extra information that your portfolio is 90% UK, it does make sense for you to be exiting one of the many UK holdings.

Still, 20 holdings mostly UK?? That is a lot of funds to be investing in the UK and when you blend them all together you will have a lot of overlap and mishmash of everything. I'd assume you could probably trim down to 3 or 4 at the most to cover various different UK styles of investing and be done.

You say that the smallcap fund was the only one to be down last year and that you are usually one to stick with your holdings during the peaks and troughs. A relative trough is perhaps the wrong time to sell a holding... If you are mostly in large to medium size companies then it is probably more reasonable to keep this smallcap one and sell one (or more) of the many other UK holdings of large to medium companies to bring your overall exposure to the UK down without giving up your exposure to this little specialism of small growth companies.

Then when looking at how to deploy the new money outside the UK, I still think it makes sense to look wider than a US specialist fund as the world is a big big place.

Overall you say your portfolio has served you pretty well, but markets have been going up up up for almost 6 years now. You may find that the portfolio serves you less well when the markets are going down down down, and it's at times like those you realise why people say not to be heavily weighted in one thing (like UK equities).

Midass

I tended to pick my funds by fund manager and and bought as and when I could afford to. I totally agree that I have a lot of overlap hence why I don't want another UK investment.
I take on board that it may be wiser to look at global rather than just America.
As I have a company pension my investments are for some income but mostly growth (probably for my kids inheritance!!!)

dunstonh

Asset allocation is the most important thing. Fund manager is a smaller part of it. 90% UK equity is way above any asset allocation model I know of. So, reducing that makes sense.

I take on board that it may be wiser to look at global rather than just America.

it certainly does. Hendersons do a nice simple chart which shows the different sectors and how they performed for a number of years.
https://az685122.vo.msecnd.net/documents/16075_2014_08_05_07_19_24_897.pdf.gzip