FUND FOCUS:MANAGED CAUTIOUS

Best performer – five years: Standard life Synergy Cautious Managed +11.98%

Worst performer – five years:Irish Life High Income -30.645%

WHILE MANAGED funds, particularly cautious managed funds, have been criticised by some for being over-conservative and adopting a one-size-fits-all strategy for investors, they have remained a popular choice for Irish investors.

Looking at a five-year period, Moneymate data shows that Irish domestic funds invested in managed cautious funds delivered an average return of -2.382 per cent in the five years to February 2nd, 2011, although the picture is more positive over the last year.

Standard Life Synergy’s Cautious Managed Fund was the best performer over the period, posting a return of almost 12 per cent. As with most cautious managed funds, the fund invests across a range of equities, bonds and other fixed interest securities, aiming to deliver most of the return potential of a typical managed fund, but with less risk.

According to Standard Life’s Paul Smith, about 55 per cent of the fund, which is managed from Edinburgh, is in euro government bonds, 30 per cent in global equities and 15 per cent allocated to UK commercial property.

The bulk of the fund, euro government bonds, is under weight in peripheral debt, with no exposure to Greece, Portugal, Spain or Ireland and an emphasis on German and French debt.

It has also taken a number of off benchmark positions, such as UK gilts, which performed particularly well after the British election, and US treasuries, which have been pretty active, with strong gains in the second quarter of last year. According to Smith, the fund is hedged back to the euro, so there is no currency risk.

The holding in UK commercial property proved to be a sage move by the fund managers. UK commercial property has vastly outperformed Irish property over the last few years, with this category delivering a 10 per cent gross return for the fund last year.

At the other end of the scale, an Irish Life High Yield fund returned -30.645 per cent, although it is in the process of being reclassified by Moneymate. Leaving it aside, Irish Life’s Life GM Cautious is the sector underperformer, returning -8 per cent.

Irish Life investment analyst Stephen Cass says this latter fund follows a cautious mandate, with about 50 per cent of the assets in cash and government bonds; however, 15 per cent is invested in Irish commercial property, which has negatively affected returns.