But don’t put all your money in a single product as you still need to spread your risks
Thursday 23 Jan 2020 Author: Steven Frazer

One-stop-shop funds are products designed to give investors everything they need under one roof, namely asset diversification.

They can be especially attractive to investors new to handling their own long-term savings, as well as first-time investors or retirees put off by poor annuity rates. They may also work well for those investors that do not wish to make asset allocation decisions themselves, but would rather leave the tough calls to an expert.

These types of funds tend to be multi-asset, which means that they will own shares and bonds, and can sometimes give you additional access to property, and commodities, while avoiding anything seen as too exotic that could suddenly blow a hole in performance.

STARTING OUT

All investors have to start somewhere with their investment journey and shares in an individual company are not really a suitable place for a first-timer. A multi-asset fund might be more appealing, or perhaps a tracker fund or ETF that tracks the FTSE 100 index in the UK or the S&P 500 index in the US, as these are much more diverse and the investor is spreading their risks.

The product decision comes down to individual needs and choices. ‘What does an investor want to achieve?’, says Paul Niven, who has run the F&C Investment Trust (FCIT) since 2014. ‘What is the individual’s risk appetite? What type of asset exposure do they want? And what is their timeframe?’ These are all important questions for any investors to ponder, especially those new to financial markets who may never have considered their long-term savings goals before.

The scale of one-stop-shop funds available to investors can be mind-boggling. There are numerous multi-asset type funds on the AJ Bell Youinvest platform, for example, as well as many relevant investment trusts listed on the London stock market.

For example, the 152-year-old F&C Investment Trust – the UK’s oldest – pitches itself as a one-stop shop fund largely to retail investors with the nuance of being ‘exposed to growth assets’ in stock market listed and private companies. ‘We cover a lot of bases with one asset purchase’, says Niven.

The four-star Trustnet rated Brunner Investment Trust (BUT) calls itself a ‘one-stop-shop’ investment solution for global growth opportunities and dividends that rise over time.

Run by manager Lucy Macdonald, Brunner is a ‘Dividend Hero’ trust, namely one that has increased its dividends every year for at least the past 20 years – in Brunner’s case it is 47 years in a row. Investing exclusively in shares from around the world, its largest stake is currently Microsoft, but it also holds shares in pharmaceutical, semiconductor, payments and oil companies.

CAN STOCKS ALONE PROVIDE A SOLUTION?

Can funds that only contain equities (another word for stocks and shares) really be a one-stop-shop when gold, bonds and property bring their own advantages to a rounded investment portfolio, such as income that is fixed for a given time period and won’t change, or reduce risk?

F&C’s Paul Niven believes they can. ‘Government bond returns have been as good as equities over the last decade, but that’s historical, and returns may not be as generous going forward.’ He believes equities provide flexibility that won’t leave investors locked into income streams that may start to look unattractive when interest rates begin an up-cycle.

Access to gold can be obtained through select mining stocks, while commercial real estate firms or even housebuilders are equity ways to play property without the enormous cost of physical ownership or, importantly, the illiquidity that owning shopping centres of office blocks brings.

MULTI-MANAGER APPROACH

‘Our multi-manager strategy is inherent in a one-stop-shop premise’, says James Hart, investment director of the Witan Investment Trust (WTAN).

Witan is not a multi-asset fund but deliberately describes itself as multi-manager. ‘We run focused segregated mandates under Witan’s control,’ says Hart.

This means appointing the best specialist managers it can find and letting them operate 15 to 60 stock concentrated portfolios covering different parts of the world and styles. It recently launched a climate change mandate, for example.

Combined, Witan has somewhere in the region of 350 to 400 stocks in the overall fund, giving it a broad spread. ‘The message we get from financial advisers and wealth managers is that many investors see Witan as a cornerstone investment,’ says Hart.

But while a one-stop-shop fund may sound ideal for many investors, remember that investing in a single fund contradicts an important tenet of investing – namely that you shouldn’t put all your eggs in one basket, not even when that’s a fund holding a wide selection of investments.

Financial advisers may have have different views but the consensus opinion is that somewhere between 10 and 15 funds or investment trusts is probably ideal, depending on the size of an individual’s savings pot. That’s a sensible longer-term objective.

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