Leaders, laggards and switches - model portfolio April 15 update

Money Observer's 12 Model Portfolios all made positive progress during the first quarter, thanks to strong stockmarkets worldwide

Read the latest model portfolio update here.

Below, we look at the funds that have served the portfolios best this quarter, and those that have struggled in relative terms.

We also review the two fund changes made, both of which are holdings in the income-oriented portfolios.

Leading income holding - Artemis Global Income

Artemis Global Income is now included in five of our six income portfolios. We believe it is very important nowadays for income investors to have exposure to overseas markets in order to provide diversification.

This fund, managed by Jacob de Tusch-Lec, has exposure to the growth prospects of 28 countries and 17 different currencies. It does not have much exposure to the UK so it is a useful complement to the more UK-focused equity income funds in the portfolios.

Leading growth holding - Lindsell Train Global Equity 

This fund was added to the Alpha short-term, medium-risk growth portfolio at the beginning of the year. The portfolio had been one of our laggards, so we are delighted to see the Lindsell Train Global Equity fund giving it a boost. Michael Lindsell and Nick Train focus on "businesses with truly sustainable business models and/or established resonant brands". The fund is concentrated, holding around 20-35 stocks, and has a low turnover. It currently has a 25% exposure to Japan, one of the best-performing markets in the first quarter.

Lagging income holding - Temple Bar

Temple Bar, which is included in four of our income portfolios, is proving a useful source of income - in 2014 announced its 31st year of consecutive dividend increases, but its capital performance has been disappointing over the past 18 months. This has been exacerbated by the fact that its shares have fallen to a 5% discount below net asset value this year for the first time in nearly four years. However, we still feel this holding can play a valuable role in these portfolios in the future given manager Alastair Mundy's contrarian approach.

Lagging growth holding - Blackrock World Mining

Blackrock World Mining has continued to lose ground due to the slump in commodity prices and the setback it suffered last year when it was forced to write down its royalty investment in London Mining, an iron ore producer in Sierra Leone that went bust. The trust's shares now stand at a 14% discount to net asset value. However, it paid out an attractive dividend last year, which was covered by earnings. Analysts at Winterflood Securities point out that even if the income were to be rebased by say 10%, the prospective dividend yield would still be over 6%. Winterflood also believes the trust presents an attractive recovery play.

Portfolio switches: Income portfolios

Out

Fidelity Moneybuilder Income

Fidelity Moneybuilder Income, managed by Ian Spreadbury, is included in both the Golf and Hotel portfolios. It has performed well for us but it invests primarily in sterling denominated investment grade corporate bonds, and we feel that in current market conditions it would be better to have our fixed interest exposure in funds with greater flexibility to invest in a wider range of bonds for the greatest opportunities.

M&G Optimal Income

M&G Optimal Income has been part of three of our income portfolios since inception. We still believe Richard Woolnough is one of the UK's best bond fund managers, but we have been somewhat disappointed by the yield on this fund which has recently been below the 2% mark. We have therefore decided to replace it with the other higher-yielding strategic bond funds below.

In

Fidelity Strategic Bond

We are using this fund to replace Fidelity Moneybuilder Income in the Hotel portfolio, and M&G Optimal Income in the India portfolio. Fidelity Strategic Bond yields marginally less than the former but we think that, for the sake of potentially higher total returns, it is important to give manager Ian Spreadbury greater flexibility to invest across all types of bonds. Its effect on the overall yield of the Hotel portfolio is also offset by the fact that it yields more than M&G Optimal Income.

Baillie Gifford Corporate Bond

Baillie Gifford Corporate Bond will replace Fidelity Moneybuilder Income in the Golf portfolio and M&G Optimal Income in the Hotel and Kilo portfolios. Besides being a strategic, go-anywhere fund, it also has a higher yield. Another potential advantage is its relatively small size at under £500 million. It consists of 40-60 of the "best ideas" bonds that managers Stephen Rodger and Torcail Stewart can find across the high yield and investment grade markets.

*The changes outlined above will be reflected in the 12 model portfolio factsheets from 15 April. See http://www.iii.co.uk/investing/model-portfolios for more details.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.