Eugene Gibney is chief investment officer with Friends First, which has €4.5bn of assets under management. His responsibilities include the Magnet and Compass range of portfolio funds, a range of ready-made portfolios, each designed with a particular type of investor in mind.
Magnet Cautious is the most popular fund in the range and is a low- to medium risk-fund of funds. It’s available to lump sum investors with a minimum of €10,000 to invest, and those who agree to invest €150 per month on an ongoing basis.
Philosophy
Magnet Cautious aims for steady long-term growth in excess of cash with a strong emphasis on minimising volatility.
It invests in defensive assets such as government and corporate bonds as well as absolute return funds, which aim to provide returns for investors regardless of whether markets are rising or falling. It also has exposure to equity markets and other growth assets.
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“Our portfolio funds are multi-asset, multi-strategy and multi-manager that, when blended together, give a volatility-targeted return,” said Gibney. “We do the difficult number-crunching work to create a ready-made risk-adjusted, diversified investment contained in a single portfolio. That’s the elixir we bring to investors.”
Performance
Magnet Cautious is up 4.1% year to date while over three years it has posted an average annual return of 4.6%, which Gibney described as “a strong performance for a low-risk fund”.
Buying and selling
Almost 25% of Magnet Cautious is currently held in Magnet Absolute Friends First, a new multi-manager fund of absolute return funds.
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“We think absolute return funds are going to be a key component of investor portfolios in the future as they have clear performance objectives. Magnet Absolute has an objective of cash plus 3% over a rolling three-year period, which is why it forms part of the bedrock of Magnet Cautious,” said Gibney.
More than 40% of Magnet Cautious is held in European government and corporate bonds with an emphasis on short-dated securities.
Approximately 20% of the fund is invested in equities, split roughly three to one in favour of developed equities over emerging markets equities.
Just over 6% of the portfolio is invested in property, split between Friends First’s Irish Commercial Property fund and its UK Select Property fund.
“Although the holding is not overly large, property is a sensible component of a well-diversified investment portfolio because it can deliver attractive returns,” said Gibney. “The Irish Commercial Property fund continued to perform well as a result of successful active management strategies and capital value improvement projects on existing assets.”
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Outlook
Gibney sees more volatility in markets. “The one constant in the markets is change. The amount of information that is accessible now by investors has led in some instances to a move away from fundamentals,” he said. “Our view is that the more diversified you are the less exposed you are to market volatility.”