Pyrford Global Total Return – fund performance review

As part of our research and analysis, we analyse fund manager performance after charges, to find managers who are truly adding value for investors. We monitor this on an ongoing basis and how it compares with our expectations. This includes analysis of a manager’s ability to add value through stock selection and their style of investing. We like those who stick to their investment process and are disciplined in applying it through different market conditions. As part of this analysis, we’ve conducted a review of the Pyrford Global Total Return fund.

What we expect from the fund

The Pyrford Global Total Return fund aims to deliver a return ahead of inflation over the long term. While it won't shoot the lights out, the managers try to grow investors' wealth modestly over the long run, without all of the significant ups and downs of investing fully in the stock market. We believe this makes it a great option for a more conservative portfolio, or as a way to bring some stability to a broader investment portfolio. Like all investments it will still rise and fall in value, so investors could get back less than they invest.

The fund has two other objectives:

• To not lose clients’ money over any 12-month period
• To have lower volatility than shares

Please note that the fund can invest in Emerging Markets which can add risk. Additionally, as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.

Performance analysis

The aim of delivering a return ahead of inflation is a long term one. The fund managers use the Retail Prices Index (RPI) as their measure of inflation. We typically think of long term as investing for a minimum of 5 years.

Since the fund was launched in 2009, this aim has been met. More recently though, the fund has struggled to provide returns ahead of RPI. This is particularly true in 2022.

The fund mainly invests in shares and bonds. The way the team invest in these assets over the long term has typically generated performance in excess of inflation. However, over the shorter term, it is more likely that there could be a big difference between inflation and fund performance.

The 12 months to the end of September 2022* are an example of this. High levels of inflation have made central banks around the world raise interest rates, to cool economies and try to bring inflation under control again. The combination of high inflation and rising interest rates has not been good for bonds and the expected slowing of economies has caused a lot of volatility in share prices.

The following table shows 12 month returns over the last 5 years for a number of different sectors, across share and bond markets:

Past performance is not a guide to the future. Source: *Lipper as at 30/09/2022.

Please note that these are not official benchmarks or performance comparators for the fund, however they are being shown here to illustrate the performance of asset classes that are available for the fund to invest in and to give wider context to the returns achieved by the fund over each 12 month period over the last 5 years to 30 September 2022.

So, while the fund has not kept pace with RPI, we think its returns look reasonable in comparison with the other indices shown above, and the volatility of returns has been low. Realistically, given the returns of the asset classes that the fund invests in, beating RPI has not been possible.

Aims and benchmarks

Setting aims and benchmarks in the total-return sector is challenging. It’s very common for these funds to seek returns above cash or inflation, however these benchmarks only ever really go up in value, while the funds are invested in assets that go up and down. So, there can be a mismatch, particularly over the short term. It’s therefore important to consider the fund returns in a wider market context as well as against any other objectives the fund has.

Our View

As part of our review of the fund, HL’s research team have met with Pyrford to inform our performance expectations. We’re not concerned that the fund has lost a small amount of value and has not kept pace with inflation over the 12 months to the end of September 2022.

It has broadly held its value which considering the market conditions over the period is a good outcome. Since the launch of the fund, it has beaten RPI. It has also consistently met its two other objectives of positive 12-month returns (there are only a handful of periods where this has not been met) and lower volatility than shares. Past performance is not a guide to the future.

For more about this fund please see the research tab of our fund factsheet

PYRFORD GLOBAL TOTAL RETURN KEY INVESTOR INFORMATION