LIONTRUST MA BLENDED INTERMEDIATE: Blend can be your friend in battle to storm-proof a portfolio

Running a portfolio of funds with different risk levels during a tornado of tariff announcements is like trying to shelter from a hurricane under an umbrella.

But John Husselbee, who oversees Liontrust’s suite of multi-asset funds, reckons his storm-proofing is holding up okay.

‘I think blend is your friend,’ he says, referring to his firm’s practice of putting together a mix of active and passive funds invested in corporate bonds and government bonds and geographically diversified equities to create portfolios with varying volatility levels.

The idea is that by holding a range of assets the funds will not suffer too big a fall if any one drops in value.

The MA Blended Intermediate fund sits in the middle of Liontrust’s risk-rated multi-asset range and its popularity suggests many investors hope it will hit the Goldilocks ‘sweet spot’ in terms of risk – neither too hot nor too cold.

It is now worth £360million and is the largest of the Liontrust Multi-Asset range.

Husselbee says that, like most such funds, the product aims to provide a one-stop shop for investors, a ‘core holding’ that can be used at the heart of a portfolio, with investors bolting on other funds that they are interested in.

It has a classic ratio of 60 per cent equities to 40 per cent bonds and its stated aim is to provide ‘capital growth and income with a median level of volatility’.

To this end, it has been awarded a risk rating of four, in a range of one to seven where seven is high risk and one virtually unsinkable.

But as we are all discovering, even medium volatility can be sizeable in times of great market turbulence. In the past three months, the fund is down 5.5 per cent.

Husselbee’s special blend is not enough to contend with US President Donald Trump’s vacillations, though a closer look suggests that diversification and the ability to take active decisions may have taken the edge off the pain.

We can see this by comparing it with its vastly popular and cheaper rival, the passive Vanguard 60/40 LifeStrategy Fund, which is down 6.7 per cent in the same period.

The Liontrust fund takes a more active approach, which means that managers can change its composition depending on where they see opportunities or heightened risk. For example, the portfolio currently contains a lower proportion of US equities than a typical fund with its remit because Husselbee was worried prices were rising so rapidly that they look expensive.

He says: ‘We have less in the US, which we think is the most expensive market. Tall trees don’t grow towards the sky for ever.

‘We’ve been putting more money to work in the UK, in Europe, in Asia, Japan and emerging markets, where the earnings in some cases have been just as good.’

It means he has missed out on some growth as well, with 5.4 per cent growth in his fund over the past three years compared to 8 per cent-plus for the Vanguard alternative. But Husselbee is convinced that being actively managed will allow his fund to pick up on opportunities and value. 

The fund is tilting towards smaller businesses because he sees opportunities in this area when interest rates begin to fall. He is also favouring corporate bonds over government debt – particularly US Treasuries – as he feels there’s a low default risk from high-quality company debt and it offers better value.

With an annual management charge of 0.4 per cent against Vanguard’s 0.22 per cent, investors pay for the privilege of active multi-asset management – but some may feel that now is the right time for an expert hand.