Advice on Investment Funds

29th Apr '21 by Caper4

9 comments 719 reads

I am in the fortunate position of having a fairly large 6 figure sterling deposit maturing in a few weeks . This money I will not need for the foreseeable future and as I already self manage my own significant investment portfolio,I think it would be sensible to allocate the maturing funds to a variety of investment funds ,offering a geographical and diversified spread . My wish is to concentrate on funds in the Small/Medium sector .
Thinking of the following and would appreciate feedback .

Allocation

Marlborough Special Situations fund
Franklin Templeton UK Mid Cap fund
The Mercantile Investment Trust
Vanguard Global Small-Cap Index fund
iShares MSCI Emerging Markets Small Cap fund

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About the Author

Caper4

Premium Member

Am now retired but worked for most of my life in financial services based mainly in Asia and the Middle East. Have been an active investor in Asian and U.K. stock markets for many years,and am currently long on a number of quality companies with an Asian focus . Am an investor in a number of small companies in the U.K. and a Director of a few. more »

9 comments

gus 1065

29th Apr '21

Hi Caper 4.

Looks as though you’ve picked a good crop of small and medium cap focused funds that should give you what you need. The last two are pretty efficient global small cap index trackers (I hold Vanguard in my SIPP, low AIC of 0.29% and globally diversified) and the first three are actively managed specialists that all have good track records albeit with relatively higher costs. Marlborough (I hold) and Franklin Templeton are U.K. focused and as the name suggests the FT U.K. fund is mainly FTSE 250 rather than small cap. Mercantile IT is also U.K. focused and a blend of small and mid caps. Plenty of other decent U.K. small cap focused funds - it’s quite fertile ground. Those managed by Jupiter, Premier Miton and Lion Trust are highly ranked and there are some more specialised ones from the likes of River & Mercantile and Amati VCT (I hold the latter two) that are worth looking at. I guess you probably need to decide whether you want the cost/diversity/simplicity benefits of the big global index trackers or the more expensive/involved but potentially more rewarding actively managed specialists.

If - as you suggest- you also actively manage a portfolio of investments it may be worth paying a slight premium to hold positions in the more actively managed funds where you can drill down into the underlying portfolios and maybe piggy back on some of the funds‘ ideas and research to the benefit of your own direct holdings. Perhaps one strategy to consider could be to park the bulk of your windfall in the two big global trackers as and when you get the cash and then switch out to specific specialist funds as and when you’ve had more time to research them and get a feel for how they are managed.

Gus.

samanddee

29th Apr '21

Just watch out for the fees from HL and the like for holding funds rather than ITs. Marlborough though is on a good run at the moment and I’m not sure there is a IT equivalent of it. BIOG is worth a look if you fancy something specialising in that area.

Caper4

30th Apr '21

thanks Gus much appreciated

ls2g08

30th Apr '21

There is a great diagram in the Investors Chronicle showing the impact! This compares the costs charged by platforms on the Baillie Gifford global growth Fund vs Monks Investment trust, which have had similar performance. very roughly in a fund at Hargreaves Landsdown you will have paid about 8% of your initial investment in fees over 10 years, where as in a trust you will have paid only 1%!

KTF67

3rd May '21

i ran the correaltion stats for these 5 using Bloomberg correlation function. Hardly surprisingly they are all highly correlated (0.75-0.88) particularly the first 4 particularly over the last 1-2 years for obvious reasons. Looking at 2015-2019 Marlborough & Franklin highest approx 0.75, Mercantile 0.67* to Marlborough & Franklin.

samanddee

3rd May '21

Great indicator - way cheaper in the trusts so long as you can find something that lands the same or similar returns for sure!

KevinS1

3rd May '21

Does anyone know if that Vanguard fund is available through HL. I cant seem to find a lot of their funds on the HL platform - I know its probably cheaper holding them direct, but I would like to keep my PF in one place.

pka

3rd May '21

The Vanguard Global Small-Cap Index fund is available through HL, in both its accumulation units and income units form:

https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-small-cap-index-accumulation

KevinS1

3rd May '21

Thanks. I had been looking in the IT/shares/ETF section, hence not spotting it.

I always feel HL are very expensive for funds and looking at this fund their 0.45% fee pa. for funds means you would be losing approx 0.8% pa. for holding this with HL. (Their fee plus Vanguards fee).

Vanguard fees are very good on their own, but not sure I could justify nearly doubling this for HL's part in providing their platform.

I will see if I can find anything similar in their ETF list.

Thanks for highlighting pka.

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Advice on Investment Funds

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Caper4

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