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Firm applies the Jimmy Connors test as downturn looms

Gould Financial Planning has added some ballast to its portfolio to beat the stock market slump, by diversifying and bringing investments in house

Firm applies the Jimmy Connors test as downturn looms

Newport-based Gould Financial Planning has armed its portfolios with several strategies designed to protect clients against the stock market slump.

In mid-2017, it anticipated an end to the bull run by rebalancing all risk asset classes to neutral. But as market risks increased last year, the firm sought stricter safety measures. The first was to reduce exposure to developed market equities in favour of diversifying themes such as physical gold, robotics, battery chain storage, cybersecurity and water.

One of its favourite funds is iShares Automation & Robotics, which it says is ‘at the bottom end of the “S curve”,’ meaning its growth trajectory is set to steepen (see performance below).

Hate to lose

Gould investment director Richard Haines (pictured, main) says: ‘The gold is purely a hedge against downside losses. 1970s tennis star Jimmy Connors said he hated losing more than he loved winning – we are the same.’

Another shock absorber in portfolios is the TIME Commercial Freehold fund, managed by Citywire AAA-rated Nigel Ashfield, which invests in long-lease property and commercial ground rents. Although Haines says it is not cheap, ‘the returns have been consistent.

‘As with any property fund, there is a potential liquidity issue, but it is backed by physical property and the risk is worth taking for the consistency on offer.’

According to Citywire Discovery, Ashfield has posted first-decile, risk-adjusted returns in the UK property sector over one and three years, and second-decile returns over seven years.

Another diversifier in Gould’s portfolios is the Investec Cautious Managed fund. Haines says he has kept this fund despite some indifferent recent performance because he likes its consistently contrarian views.

‘If our core holdings fall with the market, it means we have some ballast,’ he says. ‘We also hold absolute return funds – Newton Real Return and Brooks Macdonald Defensive Capital – for the same reason.’

Gould’s most commonly used global equity fund – Vanguard Global Equity, managed by A-rated Charles Plowden – has recorded first-decile, risk-adjusted returns over three, five and seven years. However, this has tumbled to seventh decile over one year.

Haines runs the firm’s investment committee, which meets every month and has six members representing directors, the investment team and compliance staff.

One-stop shop

Gould Financial Planning uses bespoke in-house portfolios. Haines says keeping investments in house helps suppress costs and maintain control over investment decisions.

‘We asked our clients and they said they want a one-stop shop [for planning and investment],’ he says. ‘Also, we think many discretionary fund managers [DFMs] are esoteric and overcomplicated. We do use multi-asset funds, but we avoid funds-of-funds, which we see as paying twice for the same service.

‘We generally have produced more return for less risk compared with [DFMs in] benchmarks provided by Asset Risk Consultants. We also use Natixis, which measures the performance and volatility of our typical portfolios against market averages.’

Last year, Gould’s cautious and moderate portfolios experienced a blip as they failed to outperform the market significantly, says Haines. ‘This was because the team had a negative view of traditional fixed income, so clients lost out when gilts performed well, but we were happy with the decision about gilts overall,’ he says.

The team sets asset allocation with the help of research from FinaMetrica, and filters funds initially using research from FE Analytics.

‘We score the [filtered funds] using internal algorithms, then do qualitative analysis on the top quartile,’ said Haines. ‘These algorithms look at factors such as performance, alpha, R squared and downside capture ratios.’

The team also attends Citywire retreats and conferences regularly to keep abreast of investment issues.

For the future, Gould is developing a suite of ethical and socially responsible investing (SRI) portfolios.

Managing director Mark Redman says: ‘Although there has been little client appetite yet, priorities change and the next generation will be more environmentally and SRI aware, so we need a proposition ready for them.'

Read more: Gould Financial Planning profiled

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