FUND FOCUS:MANAGED BALANCED

Best performer YTD:

MGI Funds UK Moderate Growth Fund +14.2%

Worst performer YTD:

AIB Investment Managers Ethical Balanced Income +2.1%

IT’S NOT often you can say this, but in the current environment managed balanced funds appear to be fulfilling their ultimate aim – managing volatility, reducing risk and providing decent returns.

According to MoneyMate, so far in the year to September 17th Irish gross domestic managed balanced funds have returned 6.6 per cent on average, or 9.9 per cent over the previous 12 months. Moreover, of the 100 plus funds available to Irish investors in this category, 100 per cent are in the black.

The best performer in the category is MGI Funds’ UK Moderate Growth Fund, which has posted an impressive 14.2 per cent return so far this year, and is up by 17.8 per cent over the 12 months. Similarly, Standard Life’s Synergy GARS fund is another strong performer, up by 10.9 per cent so far this year, and by 13.2 per cent over the previous 12 months.

Euan Munro, head of multi-asset investing with Standard Life, says the fund is made up of two components – a fairly traditional balanced portfolio of a broad mixture of asset categories, and the use of derivative strategies to take and hedge exposures.

The fund takes a three-year horizon and currently has about 25-26 strategies in play, with two different focuses – directional ideas, which look to get the direction of the market right, and relative value strategies, which favour one type of asset over another.

According to Munro, the fund has performed well because some of its strategies have worked so well, such as its exposure to interest rates coming down across economies like the UK, the euro zone and Australia.

Looking ahead, Munro says we are looking at a “very anaemic, unexciting, gradual, difficult and jobless recovery”, and as such, the fund won’t be looking for massive capital gains but for assets which provide an income.

At the bottom of the table is AIB Investment Managers’ Ethical Balanced Income fund, which has nonetheless provided a positive return for investors so far this year, increasing by 2.1 per cent, while it is up by 5.7 per cent over the previous 12 months. The fund is denominated in euro, and its primary objective is to generate income from year to year by investing in companies which do not carry out activities of ethical concern.