HEAD-TO-HEAD: Investec versus JP Morgan

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Investment process

While the Investec fund is more defensive, with the aim of minimising volatility and preserving capital, the JP Morgan product seeks to gain comparatively more capital appreciation in addition to the income target, according to Ng.

The Investec fund targets an annual yield of around 4-6% annually, while the JP product’s yield target is around 3-5%, according to Ng.

“The Investec fund tries to be defensive to deliver a vehicle that has a bond-like feature. That means that the volatility will be similar to that of fixed income products,” he said.

Ng added that the Investec fund is also aiming for volatility that is less than half of the MSCI AC World Index.

Therefore, the Investec fund is also different compared to how most multi-asset products are managed, which involves a combination of a top-down (asset allocation) and bottom-up (securities selection) process.

According to Ng, the Investec fund only employs a bottom-up process.

“The managers try to avoid labelling investments into different asset classes.”

Instead, the process involves categorising investments into three categories: growth, which include equities, high yield and emerging market bonds; defensive, such as government and investment grade bonds; and uncorrelated assets, such as alternatives.

Turning to the JP Morgan fund, Ng believes that it follows a more traditional investment approach, in which the process is split between asset allocation and securities selection.

A dedicated multi-asset team decides on asset allocation, while individual securities selection is done by the firm’s in-house portfolio managers that specialise in a particular asset class, according to Ng.

The differences in their approach are reflected in asset allocation. Given that the Investec fund is more defensive, around 30% of assets are in cash and it holds comparatively less emerging market equities, according to data from Morningstar.

Government bonds also take up 25% of the Investec’s fixed income sleeve, which compares to the JP Morgan fund’s 77.5% allocation in corporate bonds.

Overall asset allocation (%)

Source: Morningstar

Bond allocation (%)

Source: Morningstar

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