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Like yin and yang, it's all about balance

The Atlantic House Balanced Return Fund is the top performer out of 190 competitor funds for the year*

Jack Roberts, CFA - Fund Manager

In what has been a strong year for the Atlantic House Balanced Return Fund, we are pleased to see not only it's outperformance but that this has been driven by the fund's systematic approach and stable asset allocation.

The performance of the Atlantic House Balanced Return Fund versus the 20%-60% sector and some well-known multi-asset funds

Past performance does not predict future performance. Source: FE Fund Info as at 28-11-23

It should be encouraging for existing and prospective investors that, by the fund's very nature, such an outcome is more repeatable than if the outsized performance had come from a few trades or bets that have since been unwound.

The fund began the year as the Atlantic House Total Return Fund but in seeking to improve the transparency of the investment strategy for investors was renamed. The 'balanced' name is reflective of the fund's neutral asset allocation, which sees 60% of the portfolio in defined return investments tied to the performance of equity market indices.

It's allocation to equity-like investments (Defensive Equity) should and has been the engine room of the fund, adding approximately 10.4% to performance for the year. The remaining allocations, akin to fixed income and alternatives, named Dynamic Duration and Crash Protection, play the role of diversifiers.

Instead of reflecting on select moments throughout the year to assess the performance of each allocation, we have been delighted to observe, more importantly, a consistency in how well each allocation worked together. Such a metric is measured using the Sharpe Ratio, which looks at the fund's excess return (return above cash) divided by its risk (volatility).

The Sharpe Ratio is close to 1.4 for the year. You are hard pressed to find one more favourable across multi-asset funds.

This metric demonstrates that the three allocations; Defensive Equity, Dynamic Duration, and Crash Protection all complement each other well and reduce risk but not at the detriment to performance.

As the balanced name suggests, the fund is most appropriate for medium risk investors, verified by the fund's Defaqto risk rating of 5.

With its 60% neutral allocation to defensive equity, our clients have used the fund alongside other multi-asset funds in the IA Mixed Investment

20%-60% sector to bolster and improve overall portfolio diversification.

Similarly to most traditional multi-asset strategies, the fund has been developed to extract its returns from equity, fixed income and alternatives.

What makes it so unique is its defensive construction, targeted use of derivatives, and systematic implementation within both its allocations and at the wider portfolio level.

Manager views are rarely found, less so acted upon. The process followed is largely systematic, which lowers behavioural risk and poor outcomes for investors. Importantly, with its relatively static allocation process, it is less at risk of the boom-bust scenarios many funds find themselves in. Instead, it's designed to be a predictable (some might say boring) fund that helps professional advisers who are seeking more consistent returns to achieve them, across a multitude of economic environments.


* Past performance does not predict future performance. Source: FE Fund Info as at 28-11-23. Best performer relative to the IA Mixed Investment 20% - 60% Sector, our internal benchmark.


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