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Rampage inflation has been a global scourge in recent years, and although it has subsided recently, consumers may not be out of the woods. What is happening now is likely to further raise concerns that inflation will not go away. The Red Sea crisis is driving up sea freight rates, prompting warnings of higher prices due to supply chain pressures. One fund aims to give investors a higher return than the UK Consumer Price Index plus an additional 3% over five years, before fees. That is the £2.27bn ($2.88bn) Rathbone Strategic Growth Portfolio, directed by fund manager David Coombs. How it works This fund of his has a unique strategy. The fund does not focus solely on either stocks or bonds, but rather on liquid-type assets (accounting for 22.86% of the fund), equity-type risks (65.74%), and so-called diversification instruments (11.4%). Consists of three parts. Liquid type assets: These are assets that the company expects to be easier to buy and sell during periods of market turmoil, and may have a negative correlation with equities during such times. Examples of fund holdings include government bonds, high quality credit, and cash. Equity-type risk: Assets that have the potential to drive growth, such as stocks. High-risk corporate bonds such as high-yield bonds. private equity fund. and alternative strategies such as hedge funds with a long bias. Diversifiers: Assets that can reduce or offset equity risk during market downturns, such as precious metals, other commodities, and actively managed bonds. This is the Fund’s allocation as of October 31, 2023. Company Selection As of October 31, the fund’s major holdings include U.S. and global stocks such as Alphabet, Microsoft, ASML, and Shell. There may be something to buying growth stocks. Coombs acknowledged that nearly every other fund has done something similar this year. But he stressed that his job is to overcome inflation plus another 3%, and growth stocks are part of that job. That said, Coombs has several criteria when choosing the type of companies he prefers. Coombs said the fund’s portfolio typically favors companies with lower-than-average debt, higher profit margins and higher growth rates. “You have to pay more money to buy these kinds of assets, which is a risk, but we think it gives you more peace of mind in the event of a recession,” he said. . Coombs said these companies tend to have strong business models that don’t have “onerous” interest payments, can survive recessions and, importantly, don’t go bankrupt. And while, unlike the approach of many fund managers, valuation is not the most important metric when evaluating stocks, Coombs acknowledges its importance. Instead, he uses a metric called “return on capital employed.” This is a ratio that shows a company’s profitability and how efficiently it utilizes its capital. Return on capital employed indicates how strong a company’s business model is, while valuation is a measure of how expensive or cheap a stock is, or a sign of whether investors have confidence in the company. Since its launch in June 2009, the fund has returned 143.47% as of October 2023, outpacing the UK Consumer Price Index, which rose 135.04%. This UK his CPI figure includes his 3% which the company has added as a target to achieve. In the 12 months to September 2023, the fund returned 6.27%, below the 9.86% rise in the UK Consumer Price Index, including the 3% it added to its target. Over the past few years, the UK has seen faster consumer price increases than the rest of the world. Core inflation jumped to a record annual 7.1% in May 2023, the highest rate since March 1992. The US core inflation rate rose 5.3% year-on-year in the same month. Mr Coombs has been with Rathbone since 2007 and prior to that was a fund manager at Baring Asset Management for approximately 18 years.
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