A fully flexible way to invest
3 minute read
When you think of something that is ‘all weather’, you conjure up images of a waterproof coat, plastic garden furniture or AstroTurf at a football stadium. When it comes to investments, an ‘all weather’ fund is much the same – a fund that has the potential to deliver during all market conditions. And it’s about the fund manager being very careful in choosing which companies to hold within that fund.
Who's it for? All investors
Interesting investment funds can be found anywhere. Some of the world’s largest fund management companies, who offer a fund for every market, have the resources and experience to attract some of the best investment talent in the business. But you can also find some very interesting funds from the smaller fund management companies. In fact, there are some that run just one fund. And they dedicate all their resources to managing just that one fund. And they do it very well. One such company is Findlay Park Investment Management.
In the West End of London, close to St James’s Park and just round the corner from Piccadilly Circus, lies a little known company called Findlay Park Investment Management. Founded in 1997, Findlay Park manages just one fund. It’s a very simple business model: with one investment team, based in one location, managing one strategy. The belief is that ‘Keeping It Simple’ maximises the team’s focus.
They invest in shares of US companies, but with a focus on limiting potential losses when markets fall. It does this by trying to understand the potential loss they could bear in everything they buy. For every single investment they make, they ask themselves the question “how much are we going to lose if we are wrong?” rather than “how much are we going to make if we are right?”
But this does not mean they end up with a portfolio of dull companies with limited potential to outperform. In fact, what they look for are companies that are growing their earnings – but earnings which are sufficiently robust that they are able to withstand short-term economic and market downturns.
One company that Findlay Park has invested in for many years is Microsoft. And it’s a good example of the type of company they look for. The Microsoft Windows operating system powers over three quarters of the world’s computers, which translates into a strong and consistent long-term cash flow. Even during periods of downturn and recession, companies will still be paying Microsoft for their Windows software. And while we often think of Microsoft as a ‘high growth’ technology company, it is this resilience that means it has the potential to perform during all market conditions.
Does this approach work?
This approach to selecting companies to invest in gives us an ‘all weather’ portfolio, which could have the potential to deliver independently of the economic environment. As we know, long-term returns from the stock market are a series of lots of ups and down, not just one long straight line upwards, so this is a useful fund that has delivered returns over the long term by taking advantage of all those down periods. Note that past performance is not a reliable guide to future performance.
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 multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified one-stop 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.
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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