Trustnet Magazine Issue 15 February 2016

IN FOCUS FUND PENSION Source: FE Analytics 10 trustnetdirect.com trustnetdirect.com 20% 10% 0% Oct -10% Jun Feb 15 Feb 14 Feb 13 Feb 12 Feb 11 Feb 10 Feb 09 Feb 08 Feb 97 -80% Feb 06 MANAGER: Hideo Shiozumi FUND SIZE: £449.7m LAUNCHED: 8/10/1996 OCF: 0.89% 30% Feb 15 -60% IT Global Equity Income (36.66%) 40% Oct -40% 50% Jun -20% Seneca Investment Managers Ltd - Seneca Global Income & Growth Trust (54.23%) Feb 14 0% 60% Oct Legg Mason - IF Japan Equity (4%) Jun 20% MANAGER: Alan Borrows PREMIUM/DISCOUNT: +1.42% LAUNCHED: 04/04/1996 OCF: 1.52% PERFORMANCE OF TRUST VS SECTOR OVER 5YRS Feb 13 TSE TOPIX (22.31%) IA Japan (8.43%) Oct 40% ago. This included the reduction of its weighting to the UK, to help add some diversification, as well as to fixed income. It has done much better since this transformation and is now a top quartile performer in its sector over one, three and five years as well as over three and six months. It has also retained its top-quartile annualised volatility and downside risk over these time frames. “Since the change in mandate in 2012, the numbers have been favourable,” Tan said. “It has outperformed the FTSE All Share and has done so with lower volatility. I think the average Jun PERFORMANCE OF FUND VS SECTOR AND INDEX OVER 10YRS W hen it comes to the early stages of saving for your pension, most people look to higher risk investments in contrarian or cyclical spaces, which may be volatile but are likely to achieve stronger returns over the long term. There are others, though, who prefer to hold funds or trusts that are steady, reliable and un likely to provide any nasty shocks, regardless of where we are in the market cycle. Alan Borrows’ five crown-rated Seneca Global Income & Growth trust fits this bill. The multi-asset portfolio can invest across any asset class and region, and this flexibility has helped it into the top quartile of its AIC Global Equity Income sector over the last decade for its annualised volatility and downside risk. The trust’s longer term performance may deter some investors – it has made a bottomquartile total return of 48.07 per cent over the past 10 years, 19.43 percentage points less than its sector average. However, Charles Tan, director of investment companies research at Cantor Fitzgerald, says it would be wrong to dwell upon this figure as the trust’s mandate underwent significant changes a few years Feb 12 Such periods of strong outperformance are down to the manager’s chosen hunting ground of Japanese mid and small cap stocks. These are underresearched areas of the market, which means the potential for specialists to generate alpha – or make returns over that of the benchmark – is significant. The fund’s top holdings may not be familiar to the UK investor, including Nihon M&A Center – which advises on mergers among small and mid caps in fragmented buyer might be Ms Miggins with her £50,000 ISA.” “It’s a nice pot but probably not big enough for her to diversify across 30 different funds, and besides, Ms Miggins doesn’t have the time to do any research into whether she should be allocating 10 per cent in real estate or private equity property, for instance.” Tan says if your number one priority is to be able to sleep at night, this is the perfect long term trust. Seneca Global Income & Growth has moved from a discount of 5.42 per cent since its change in mandate to a premium of 1.42 per cent. It is 10 per cent geared and has an OCF of 1.52 per cent. This one-stop shop offers diversification across regions and asset classes, a low level of volatility and an attractive dividend yield Oct I nvestors keenly looking over the list of last year’s winning and losing funds will have noticed that one stood above all others – Legg Mason IF Japan Equity. The fund made the highest return of the 3,500 members in the Investment Association universe, posting a gain of 49.35 per cent. This is even more impressive in the context of the fact that the fund in second place finished some 15 percentage points behind. Legg Mason IF Japan Equity is managed by Hideo Shiozumi, who has more than 40 years of experience in Japanese equity investing and has a record of producing eye-catching returns. In 2013, for example, the fund was up by 63.65 per cent while its IA Japan sector and Topix index benchmark made around 25 per cent, then in 2011 it returned 27.07 per cent even though its sector and benchmark fell by about 11 per cent. SENECA GLOBAL INCOME & GROWTH Jun This delivered the highest returns in the IA universe in 2015, but its performance over the long term has been far more erratic sectors – biopharmaceutical company Peptidream and robotics firm Cyberdyne. However, it is important to bear in mind that mid and small cap stocks are much riskier and the potential for severe losses is high. Examples of this can be seen in 2006, 2007, 2008 and 2009 when Legg Mason IF Japan Equity was hit with respective losses of 50.56, 34.27, 11.54 and 11.65 per cent. A closer look at some other metrics suggests this fund may not be for all investors, especially those with a cautious approach. FE Analytics shows Legg Mason IF Japan Equity’s annualised volatility over the past 10 years stands at 24.8 per cent – the highest in the sector and more than 10 percentage points above the Topix’s. The fund has made just 4 per cent over this time, half the gain of the sector and well below the Topix’s 22 per cent rise. Feb 11 LEGG MASON IF JAPAN EQUITY Source: FE Analytics 11

Trustnet Magazine Issue 15 February 2016 | Page 12