They say time flies when you are having fun, and I must say it seems like only yesterday that we were launching the VT Chelsea Managed Fund range. Believe it or not, the funds marked their fourth anniversary this week. During their annual review, I caught up with the four investment advisors to find out more.
“While the past four years haven’t all been a barrel of laughs, they have been nothing short of eventful and, thankfully for our investors, successful too,” commented Darius McDermott. “The first two years or so saw us navigating a late cycle scenario where equities and bonds both looked expensive. But markets proved remarkably resilient, grinding upwards no matter what challenge was presented to them – until the pandemic struck in February 2020, and every asset class plummeted.
“What followed was the deepest recession since World War II, and one of the fastest stock and bond market recoveries. To say it’s been a roller-coaster ride would be an understatement. But the funds proved resilient, and we’ve been really pleased with their performance, particularly because we’ve managed to outperform despite being underweight US equities. Being named the 2021 winner of the Lipper Mixed Asset – Small Group award recently was the icing on the cake.”
All four of the VT Chelsea Managed Funds have beaten their peer groups since launch and both Balanced Growth and Monthly Income are top decile.
|1 year||3 years||Since launch|
|VT Chelsea Managed Aggressive Growth||29.59%||39.45%||52.46%|
|IA Global Sector Average||22.05%||38.06%||49.72%|
|VT Chelsea Managed Balanced Growth||23.57%||26.75%||36.17%|
|IA Mixed Investments 40-85% Shares||15.06%||19.15%||24.47%|
|VT Chelsea Managed Cautious Growth||14.24%||19.15%||22.85%|
|VT Chelsea Managed Monthly Income||14.78%||23.69%||28.71%|
|IA Mixed Investments 20-60% Shares||11.49%||14.06%||16.51%|
“One area we’ve thrived in during the life of these funds is using specialist investment trusts,” said Ryan Lightfoot-Brown. “It has allowed us to give investors access to different areas and sectors which have not traditionally been available to them. It’s also been enjoyable for us to research new areas like renewables, social housing and care homes.
“While they do add more risk to the portfolios, these types of specialist trust have been a huge boon to our performance as well as helping us to achieve our aim of a 4% yield** on the Monthly Income fund, despite record low bond yields and dividends being slashed around the globe.
“Some of our best investments have also been in the pre-IPO market. We invested in Chrysalis Investments Limited at launch and Schiehallion C investment trust more recently, for example - two trusts that invest in companies that want to stay private for longer but need funding.”
James Yardley added: “Patience has also been key. One example would be gold and silver where for the first two and a half years it was our worst-performing investment. However, the position was added to throughout the period and our conviction came through during the pandemic. The metals are now one of our strongest contributors since launch.
“Value strategies are another example. We’ve always had some exposure to these funds as we believe some balance within portfolios is best. They hugely underperformed growth for a number of years, which dragged on our performance. But we persevered and were rewarded when markets had the ‘vaccine bounce’ in November 2020. Our value fund picks from Japan to Europe to the UK all outperformed, with JOHCM UK Dynamic posting returns of more than 50% over the past seven months and Man GLG Japan CoreAlpha returning three times the sector average***.
“One area that hasn’t worked as well has been Latin America. On paper it should have done better as commodities surged, but the region has been hit harder than most by COVID and the recovery hasn’t been forthcoming. For similar reasons our overweight to India has held us back this year.”
“In recent months we’ve topped up some growth strategies like Baillie Gifford Global Discovery at cheaper prices and added some more specialist trusts,” commented Juliet Schooling Latter. “We bought another digital infrastructure trust and a shipping trust just last week, for example. We’ve also bought a residential social housing REIT and a European warehouse REIT. We also added Ninety One Global Environment, recognising the increasing importance of this theme in investing.
“When it comes to fixed income, investment grade bonds are not looking good value and the yields are too low, so we’ve added instead to emerging market debt and high yield bonds via vehicles such as Man GLG High Yield Opportunities, Artemis High Yield Bond and M&G Emerging Markets Bond.”
“The big questions for investors today are what does the new normal look like? Will inflation take hold? And will it impact monetary policy?” continued Darius. “We think inflation will remain high for a while and may be more enduring than previously expected. But with technology so prevalent in the world and price transparency, we think it will be difficult to sustain longer term.
“There are ways to help protect a portfolio from rising prices – some investment trusts we hold have assets linked to CPI, for example – but you can’t shield investments from it completely and nor would you necessarily want to. Some assets do well with mildly rising inflation.
“In an uncertain world we won’t pretend to know what the future holds, but what we do know is that diversification remains key, and we will be here putting all our efforts into monitoring your investments and doing our best to protect your hard-earned savings.”
*Source: FE Fundinfo, total returns in sterling, 1 and 3 years to 8 June 2021 and 5 June 2017 (inception) to 8 June 2021
**Please note this is an unofficial target yield and is not included as an objective in the KIID or prospectus for the fund
***Source: FE fundinfo, total returns in sterling, 1 November 2020 to 8 June 2021
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius's views are his own and do not constitute financial advice.