Rated funds 2014: Lower-risk mixed-asset funds

The range and variety of mixed-asset funds has increased significantly in recent years and they can be used to provide regular income as well as smoother growth.

Moreover, you may wish to skew your portfolio more towards one type of asset than another to reflect your attitude to risk, and there is a choice of funds that fit the bill in that respect.Typically, risk is associated with the proportion of equities in a portfolio, and the IMA now divides mixed funds up according to their potential exposure to shares. We have reflected these divisions by splitting our rated funds into lower and higher risk categories.

The lower risk category includes funds in the IMA's mixed investment 0-35% shares, 20-60% shares and targeted absolute return sectors, while the higher risk funds include those in the 40-85% shares and flexible investment sectors.

To see the full list of Money Observer Rated Funds, click here.

Henderson Cautious Managed

This fund is another member of the Consistent 50. The Henderson Cautious Managed has been managed for over 10 years by Chris Burvill, one of the most experienced managers in the sector. His aim is to take advantage of positive market movements through a mixture of equities, bonds and cash, while avoiding excessive risk.

Jenna Barnard and John Pattullo are involved in the management of the bond portion, which is invested in both government and corporate bonds. Burvill believes that by finely tuning the portfolio between the equity and bond components it is possible to generate higher returns than an investment in one individual asset class will deliver. 

Investec Cautious Managed

This is a fund that appears in Money Observer’s two short-term growth portfolios. Investec Cautious Managed has been run by Alastair Mundy for over a decade now and Money Observer rates his skill highly as a manager of this type of fund. It invests in a mixture of equities and bonds (with a minimum allocation of 35% and a maximum of 60% for each) and cash.

What makes it particularly attractive is Mundy's contrarian approach to picking shares for the fund. He looks for undervalued, out-of-fashion equities which he believes will recover and flourish again. The non-equity holdings in the fund are selected with the aim of reducing overall volatility.

Jupiter Distribution

This fund was a winner of our best mixed asset (lower risk) award last year. Jupiter Distribution is a traditional mixed-asset fund investing in a combination of shares and bonds. Rhys Petheram is responsible for the fixed-interest portion, while Alastair Gunn manages the equity portfolio.

It is designed for more cautious investors who are seeking an income but do not wish to invest the majority of their money in equities. The split between shares and bonds is flexible, with up to a maximum of 35% in shares and a minimum of 60% in bonds, depending on market conditions.

JPMorgan Multi Asset Income 

JPMorgan Multi Asset Income is an Editor's Selection. Its primary objective is to invest globally for income from a variety of different asset classes. Its flexible investment allocation approach allows it to move between asset classes, sectors and markets, depending on where the managers believe the best opportunities currently lie.

This gives the fund the potential to maintain an attractive income in varying market conditions, unlike funds focused on a single asset class where, if the yield for the asset class falls, there is little that the manager can do to counter the trend. The fund is managed by a multi-asset team lead by Michael Schoenhaut and Talib Sheikh.

Old Mutual Global Equity Absolute Return 

This fund appears in Money Observer's current Premier League. Old Mutual Global Equity Absolute Return has been managed by Ian Heslop since 2009. He is head of Old Mutual's quantitative strategies team. The fund targets positive returns in all market conditions, over rolling 12-month periods.

In order to achieve this goal, Heslop and his team build a diversified portfolio of stocks that they expect to outperform according to the macroeconomic environment, while applying stringent risk-management techniques, carefully controlling turnover and trading costs, and maintaining strict limits on sector and stock positions.

The companies they buy are assessed against various criteria including share price valuation, balance-sheet quality, growth characteristics, efficient use of capital, analyst sentiment and supportive market trends.

To find out the methodology behind Money Observer's Rated Funds, read: How 2014's Rated Funds were chosen.