“I’m not a great fan of cautious managed funds,” says Brian Dennehy of independent financial advisor Dennehy Weller in The Sunday Telegraph. In good times, they struggle compared with decent equity funds, while in hard times they are supposed to be designed to beat cash. But up to this point “they seem to have failed – with perhaps only one exception. The JPM Cautious Total Return fund”. It’s up 7.4% in the past 12 months, against 0% for the average fund in the cautious managed sector.
Designed to return cash, plus 3% after fees, the fund is currently overweight in bonds, with a 20% weighting in equities. Fund manager Talib Sheikh has a longer-term view, aiming to make money over three to five years. “We don’t think this is the year you get paid for making big asset allocation calls with a six or 12-month view,” he tells Financial Times Mandate.
But he does plan to increase the equity portion towards the end of the year, as he expects stocks to become cheaper. “There are small relative value and tactical allocation opportunities that we will definitely be pursuing, and we are certainly expecting to see pockets of value emerge towards year-end,” he adds.
“In a bear market, clients seldom want to talk about anything but cash,” says Mark Dampier of Hargreaves Lansdown in Money Marketing. “However, this type of fund can be used tactically to consolidate gains and particularly to de-risk portfolios, such as self-invested personal pensions, close to when investors might need the money.”
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JPM Cautious Total Return Fund top ten holdings
Name of holding, % of assets
KFW Intl Fin Inc 0.75% CNV 8/8/08, 1.2
Prudential FRN CB 15 DEC 37, 0.9
MER 0% CB 13/03/2032, 0.7
3I Infrastructure, 0.7
Stjude Medical Inc 1.22% CNV BD 15/12/08, 0.5
Atlas Copco AB, 0.5
Vimetco NV, 0.5
Pru FRN CB 12/12/2036, 0.5
Fortis FRN CB 31/12, 0.5
Onicom Group Inc 0% CNV BDS 31/7/32, 0.5