Wise Funds is changing the objective of the £88m TB Wise Multi-Asset Income fund and moving it from the IA Flexible Investment Sector, where it has sat since inception in 2005.
Previously, the investment objective was to provide capital growth over rolling periods of five years in excess of its former benchmark, the Cboe UK All Companies Index, and in line with or in excess of CPI.
The fund will now seek to grow its income and capital in real terms, while delivering a minimum target yield of 3% after the deduction of charges.
Wise Funds said the change was driven by the Cboe UK All Companies’ decision last year to stop calculating a yield for the index.
In a further development, the multi-asset income fund will move to the IA Mixed 40-85% Investment Sector.
Co-managers Philip Matthews and Vincent Ropers implemented the changes to provide a better comparison of the fund against a more representative group of peers, the company said, pointing to the rising proportion of growth-oriented, non-multi-asset funds in the IA Flexible Investment Sector in the past five years.
In the three years to the end of March 2022, the TB Wise Multi-Asset Income fund delivered a total return of 25.3% compared to a return of 22.4% for the IA Mixed 40-85% Investment Sector.
Direct equity holdings slashed in favour of trusts
Wise Funds said the latest changes are an extension of several portfolio measures that have been implemented since mid-2020.
They were initially aimed at restoring the portfolio dividend “without sacrificing the significant capital upside in markets at the time”, but have now become about ensuring the portfolio and dividend are more resilient.
The fund has also significantly reduced its holdings of direct equities in favour of investment trusts. At the end of 2019, they accounted for 63% – compared with direct equity exposure of 16% today. This aligns its strategy more closely to the TB Wise Multi-Asset Growth Fund.
Regarding its overall equity allocation, the fund has diversified geographically, increasing or initiating holdings in Murray International Trust, Schroder Global Equity Income, CC Japan Income & Growth Trust, and Blackrock Frontiers.
It has also been “very selectively” adding exposure to fixed income, Wise Funds said, holding 10% today, mainly via corporate loans or asset-backed securities where coupons are linked to interest rates and, therefore, provide a hedge against inflation.
Additionally, exposure to renewables and infrastructure has risen to 6.4%, with property sitting at 17%.
Well-positioned to navigate further bouts of market volatility
Co-portfolio manager Matthews said: “While the changes to the fund’s objective and sector have been driven by external factors and will not impact the way in which the portfolio is managed, we have independently been making changes to the portfolio make-up over the last two years in an effort both to reduce the volatility experienced by investors previously as well as improve the resilience of its dividend.
“We believe a well-diversified portfolio both by geography and asset allocation positions the portfolio well to navigate further bouts of market volatility amid escalating geopolitical tensions, rising inflation and rapidly shifting central bank policies. The fund’s dividend has recovered strongly since the depths of 2020 and now looks well-underpinned by a much more diverse set of sources.”
John Newton, business development manager at Wise Funds, added: “Since the fund’s inception, we have always sought to pay a good level of income. Currently we are yielding 4.4% which we believe is at an attractive level in the current market, plus we aim to grow both the income and the capital in line with inflation.”
