Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.
Investors who had got used to markets’ strong gains over the past couple of years received a sharp reminder this month that shares can indeed, in the words of the ubiquitous warning, ‘go down as well as up’. If you would like to remain invested in stocks and other financial assets but would prefer a less bumpy ride, certain funds are designed to achieve just that.
The funds that specifically target smoother returns may be named accordingly; look for terms such as ‘total return’, ‘absolute return’ or ‘multi-asset’, or for fund sectors such as ‘flexible investment’ or ‘mixed investment’. They are sometimes known as ‘wealth preservation’ funds. Equally there are funds whose record of smooth performance is not reflected in their name; we will identify some below.
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‘Sleep at night’ funds in the Select 50
Our Select 50 list of recommended funds includes just one portfolio that explicitly targets low volatility, Pyrford Global Total Return. A glance at its performance chart suggests that the fund has indeed risen in a steady manner with no serious falls over the past 10 years. Its worst annual fall was 2.6% in the year to March 2018. However, progress has also been rather pedestrian; it has turned an initial investment of £1,000 into £1,370 over the past 10 years. This is often the trade-off you make with these funds: the gentle ride and absence of severe falls are at the expense of the bigger gains some funds will make when markets are benign.
Our select list also includes one fund in the ‘mixed investment 0-35% shares’ category, Ninety One Diversified Income. The fund’s investment objective is to ‘limit volatility (the pace or amount of change in its value) to lower than 50% of that of shares of UK companies … [it] invests in a broad range of assets around the world’. It has turned £1,000 into £1,315 over 10 years; there was a two-year period in 2022-23 when it traded below a previous peak.
Another Select 50 fund to have delivered a relatively steady gain over the past 10 years is Fidelity Global Dividend, which has avoided severe drops while it has turned £1,000 into £2,523.
‘Wealth preservation’ funds
Several investment trusts – funds structured as listed companies – seek to deliver positive returns whatever the markets are doing. The Personal Assets Trust, for example, stresses that its aim is to ‘protect and increase (in that order) the value per share for the funds of shareholders over the long term’. Nevertheless, there have been some declines, if shallow, in the share price over the past decade. An ‘open-ended’, non-listed fund run on broadly similar lines by the same management company is the Trojan fund. Both have avoided all but shallow declines over the past 10 years.
Another multi-asset wealth preservation trust is Ruffer Investment Company. However, it has been considerably more volatile than Personal Assets and the Trojan fund in recent years. Some of the difference can be explained by Ruffer’s willingness to allow its shares to diverge more widely from the portfolio’s actual value. Ruffer also runs the open-ended Ruffer Absolute Return fund.
Capital Gearing also aims to preserve wealth and make steady returns. The trust benefits from the extremely long tenure of co-manager Peter Spiller, at the helm since 1982. However, the shares stand lower than in summer 2022. The same management company runs the CG Absolute Return fund.
The experienced investment trust research team at Investec, the bank, said the wealth preservation trusts had ‘both a strategic role in improving portfolio diversification and undoubted tactical value as global financial markets navigate what threatens to be a very challenging few months’.
Cash funds
You can expect zero volatility from these funds and, at least for now, a positive return even after inflation – something that was not available in the years after the financial crisis when interest rates were kept at very low levels. Also known as ‘money market’ funds, they are not zero-risk because the assets they invest in are not covered by the statutory protection scheme, but they are certainly very low risk.
More of our latest articles:
- Read: Why are investors buying money market funds?
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- Read: 4 charts every investor needs when markets fall
(%) As at 31 March | 2020-2021 | 2021-2022 | 20222-2023 | 2023-2024 | 2024-2025 |
---|---|---|---|---|---|
Pyrford Global Total Return | 8.5 | 4.0 | 1.2 | 4.4 | 5.0 |
Ninety One Diversified Income | 14.3 | -1.2 | -1.2 | 4.3 | 4.8 |
Fidelity Global Dividend | 21.4 | 8.1 | 4.8 | 12.3 | 11.4 |
Past performance is not a reliable indicator of future returns
Source: Morningstar from 31.3.20 to 31.3.25. Excludes initial charge.
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. The shares in investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. .
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