Patrizia Libotte is a Dublin-based fund manager with more than 15 years’ experience in the investment management industry. She is director of multi-asset funds at Friends First. Magnet Stable is one of the largest funds in the multi-asset range, in terms of assets under management, and is available through Friends First’s pension and investment products.
Fund philosophy
“In simple terms, our approach aims to gain exposure to a globally diverse mix of asset classes, styles and managers helping to spread risk and reduce exposure to any one particular asset or risk,” said Libotte.
Fundamental to Friends First’s philosophy is the belief that there is no all-weather asset class: no one asset class will consistently yield a positive return. Different asset classes behave differently depending on the economic and market environment.
Libotte said: “Diversification, putting together assets that don’t experience their ups and downs at the same time, is the only ‘free lunch’ in investments. We believe this to be the most reliable way to reduce the extent of variation in returns while maintaining returns.”
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Performance
The Magnet Stable fund aims to achieve medium to long-term capital growth with relative stability of capital. The specific objective of the fund is to maximise returns while keeping the fund’s five-year annualised volatility within a range of 5% to 10% per annum.
The fund is designed for investors who value capital preservation, and are comfortable accepting a degree of risk and volatility to seek some degree of appreciation of capital. Since inception in 2010, the fund has returned 5% per year net of annual management charges.
Buying and selling
The Magnet Stable fund is invested across a diversified range of growth and defensive assets such as sovereign and corporate bonds, equities, commercial property, commodities and other alternative strategies.
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“Strategic asset allocation is at the core of our portfolio construction approach; we do not engage in tactical asset allocation because we do not believe in the ability to successfully and consistently time markets, ie to switch from equities to defensive assets, and vice versa, in anticipation of major stock market moves. Also, over the long term, the cost of switching investments will invariably lead to higher transaction costs and lower returns.”
As of the end of December, 36% of the fund was invested in equities, 20% in fixed Income funds and 10% in property.
Outlook
“Our approach is anchored in long-term asset allocation objectives and a disciplined investment process that balances the risks, returns and correlations of various types of investments,” said Libotte.
“A decade on from the financial crisis, we have become accustomed to consistently positive investment returns at risk of being complacent, and while we cannot predict when the tide might turn, what we can say with a certain degree of confidence is that if markets do experience more volatility, a diversified portfolio will be more important than ever.”