A fully flexible way to invest
3 minute read
Diversification means making sure you’re not relying on one type of investment too heavily. This helps to protect your investments and reduce the overall risk of losing money. But even within one asset class, the argument for diversifying further is compelling. Here, we look at a fund that invests in UK companies, but takes a diversified approach to investing, by using the skills of more than one fund manager.
Who's it for? All investors
Do you feel you have less and less free time than ever before? The rise of meal kit makers in the last few years is a clear example that you are not alone. Instead of looking in the fridge at night, willing for the ingredients for a tasty dinner to appear in front of you as if by magic, they do all the hard work for you. You choose your favourite recipe, and the kit provider supplies all the ingredients you need, with no excess. The days of a cupboard full of spices used once three years ago but have never opened since are a thing of the past.
But what has this got to do with investing? Well, some of these meal kit makers are now quite large private companies, and may well become listed on a stock market at some point in the future. But the Barclays UK Alpha Fund could be thought of as a fund version of a ready to make meal kit.
The fund is made up of five different investment managers, each of whom manage a portion of the fund. Each of these – ingredients if you want to continue the cooking analogy – combine to make the final meal. A meal made up only of broccoli might be healthy, but your body needs other nutrients. One single fund may be a good investment, but it may not be right for you all the time. But if you combine a number of different funds, you would hope the resulting performance is suitably satisfying.
There are five managers within the Barclays UK Alpha Fund: JP Morgan, Jupiter, Polar Capital, and two from Liontrust. Each are experts in investing in the UK stock market, but do so in different ways.
The team at JP Morgan look to own their best ideas amongst large and medium sized UK companies, and try to get a balance of ideas that offer cheap valuations, and strong growth in earnings. The first of Liontrust’s two managers in the fund invests in companies of all size, but generally favour higher quality businesses that are growing strongly over those that are particularly cheap. The team at Jupiter take the opposite view – it’s role in the fund is to select the most unloved companies that they believe have the ability to recover and improve their operations and bring about a recovery in their share price.
Liontrust manage a second part of the fund, which is run by its Economic Advantage Team. As the name suggests, the companies they wish to own must have some kind of long-term edge over their peers. One example of an ‘edge’ could be the ability to increase the price of a product or service, without it leading to customers switching to a rival. And finally, the team at Polar Capital look to identify companies that are both cheap and improving. The manager will also invest more in medium sized companies, because they more often find ideas in this less well researched part of the UK stock market.
When combined, the Barclays UK Alpha Fund is trying to be like a good meal – nutritious and satisfying. It is not trying to be your guilty pleasure, more a reliable weekday staple. The underlying managers have been selected for their qualities and stock selection skills. They have been blended with care, carefully monitored to ensure the managers are bringing the right flavours to the overall fund.
It is important to allow the managers time to demonstrate their worth and periods of extreme returns by one investment approach or another – impossible to predict before they actually happen – to be smoothed out. This means you should only consider investing in this fund if you are able to do so for at least five years.
The Barclays UK Alpha Fund is one of 13 Multi-Manager funds on the Barclays Funds List. Find out more information about the multi-manager funds as well as other funds that invest in companies investing in the UK. Find out more information on these funds.
Correct at the time of publishing.
To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These Barclays multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.
Past performance of the fund and its manager are not a reliable indicator of their future performance.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
Read the Assessment of Value report for funds run by Barclays [PDF, 683KB] for funds run by Barclays..
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.
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