Investor Views: “We’ve Stuck with Funds Rather than Buy-to-Let”

Mika Kubunavanua’s normal approach to investing is to ‘buy and hold’. But more recently he’s taken a more active stance with his ISA funds.

He says: “I’ve been investing for about six years, since the birth of our first child, so some funds were due a review.”

Kubunavanua made some adjustments ahead of the EU Referendum, as he and his wife decided they wanted a less risk in their portfolio to mitigate the risks associated with the potential Brexit result.

He decided to sell his holding in Aberdeen Asia Pacific Equity, and invest instead in Threadneedle Dollar Bond Fund, Blackrock Gold & General and Church House Tenax Absolute Return Strategies.

He says: “We’ve held the Aberdeen Asia Pacific fund for a long time and to start with it performed brilliantly. But over the past three years it has come off the boil. We’d been hoping it would have a return to form but this hasn’t happened yet, so this seemed an optimum time to realign our portfolio.”

This fund has a three-star rating from Morningstar, but analyst Mark Laidlaw says “there are headwinds here”. These headwinds include capacity issues and the fact that the previous manager Hugo Young have moved to a broader role within the company.

However, Laidlaw pointed out that the fund still boasts a well-resourced and strong investment team led by veteran manager Flavia Cheong. For this reason it has kept the fund’s Morningstar Analyst Rating of Silver.

BlackRock Gold & General has a four star relative performance rating from Morningstar, and its manager, Evy Hambro has a coveted Gold rating. Analysts said: “This fund remains a strong offering for investors seeking mainstream gold and precious-metals equity exposure in a risk-controlled manner.”

Although Kubunavanua has only been investing for six years, his wife, who works in financial services, has invested in ISA for over a decade. They both also have pensions through their work and invest into a Junior ISA for each of their children – aged two and six.

Balancing the Portfolio Risk

The switch from Asian equity funds to precious metal and absolute return funds does not mean they have de-risked their investments completely.

He says: “We have kept our holdings in Rathbone Global Opportunities, Polar Capital Healthcare Opportunities, Stewart Investors Asia Pacific Leaders and Woodford Equity Income.”

The couple used the fallout after the Brexit vote to buy some European funds, including Jupiter European and BlackRock European Absolute Alpha.

“Our favourite fund at the moment is this Rathbone Global Opportunities fund. It’s where the kids’ Junior ISA money is held and we both have it in our ISAs and pension. It’s a great fund that covers a lot of options for us and just delivers nice consistent returns year in year out,” Kubunavanua said.

This Rathbone fund has a five-star rating from Morningstar, reflecting its outperformance relative to peers. Its manager, James Thomson, who has been with fund since its launch in 2001, has a Silver rating.

Another strong performer has been Threadneedle European Select. Kubunavanua says his wife holds this fund in her pension and it has doubled in value over the past five years. This is another five-star rated fund, with the manager David Dudding holding a Bronze Morningstar analyst rating.

Funds that have Not Delivered

It has not all been plain sailing however. Kubunavanua invested in JPM Natural Resources just when commodity prices start falling. Despite a more recent rally, he says he has still made a loss on this fund, but is holding it for the time being in his portfolio.

The couple manage their investments through Chelsea Financial Services, and make annual lump sum payments into their ISA.

“Luckily both of our employers contribute a decent amount to our pensions so we don’t need to add more to our pensions ourselves,” they added.

Alternative Investments for Further Growth

Kubunavanua has invested one VCT in the past and have one direct shareholding Pantheon Resources (PANR), an oil and gas exploration company. But he points out that this has been extremely volatile so they are sticking with funds for now.

The couple hope that if these investments continue to grow they will be able to retire between the age of 60 and 65, although Kubunavanua, who is 36, says this will depend on what their saving pots look like nearer the time.

He adds: “We’ve contemplated buy-to-let a couple of times but the time and effort needed to maintain the properties and make sure they are rented all the time just puts us off – we have little enough free time as it is. And if we paid a company to manage it for us, we’d struggle to make any decent money. So we’ve never gone ahead and done it. Investment seems like a more straightforward way to make our money work for us.”


Source Morningstar. Emma Simon | 27/07/2016

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