Best performing low risk ready-made solutions of April – June 2023
Which low risk portfolios performed the best?
By Boring Money
20 July, 2023
Every three months we get performance data from the leading ‘ready-made’ investment portfolios made available to retail investors. We group these into three risk categories and take a look at who has performed the best after all fees and charges over various timeframes. In this article, we show you the results for low risk ready-made solutions and explain what's been happening.
Annual low risk returns to June 2023
This graph illustrates 1-year returns net of charges for the top 5 performing ready-made solutions that are covered in our analysis. Performance covers the period between July 2022 – June 2023. Data correct as of 30th June 2023. The full fund/portfolio names can be found in the table below.
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How did low risk ready-made solutions perform in Q2 2023?
Amongst the low risk portfolios, Moneybox, AJ Bell and Charles Stanley have performed the best over the past 2 years, although they have posted losses 3.8%, 4.7% and 6.8% respectively. For context, the average low risk portfolio in our coverage returned -9.2%.
As interest rates have soared, those holding bonds have had a tough time. Bond prices are at the opposite end of the seesaw to interest rates – if these go up, bond prices fall.
Last year, Truss’ mini-budget rocked the bond world and made things topsy-turvy. And then this year the frequent interest rate hikes by the Bank of England have led to a significant drop in the value of bonds, which has heavily impacted low-risk portfolios, as these are the portfolios that have a high bond allocation. Ouch.
Looking solely across the past 12-months, Charles Stanley and Hargreaves Lansdown are the only 2 providers to return positive performance. Both these funds are actively managed and have a relatively high equity allocation, so we’d expect them to do better.
Santander has had a torrid time, particularly with its lower risk portfolios - its lowest risk portfolio has lost 17% over the last 2 years. A spokesperson for Santander has acknowledged the "challenging performance results" and said, "Performance has been impacted by the fall in sterling bond returns (the fund has strategic allocation of 75% to UK bonds). The Fund has a requirement to remain invested in markets, it is only permitted to hold up to 10% in cash."
Its Multi-index Fund 1’s exposure to global shares is not allowed to exceed 30%, so these guys have been slightly backed into a corner, sticking with an unloved asset class which won’t have felt very ‘low risk’ to customers. On the flip side, 2 years is not a long time in investing and, of course, short-term UK bonds may well have their moment in the sun as and when rates start to fall.
Best performing low risk ready-made solutions in Q2 2023
Provider | Fund / Portfolio | Risk Level | Q2 2023 Net Growth | 1 Year Net Growth | 2 Year Net Growth |
HSBC | Cautious | Low | 0.03% | -0.17% | -9.43% |
Charles Stanley | Multi Asset Cautious | Low | -0.09% | 1.55% | -6.78% |
Hargreaves Lansdown | Cautious Managed | Low | -0.33% | 0.50% | N/A |
Moneybox | Cautious | Low | -0.37% | -0.53% | -3.77% |
True Potential | Defensive | Low | -0.66% | -1.10% | -6.79% |
AJ Bell | Cautious | Low | -1.18% | -0.99% | -4.75% |
Vanguard | LifeStrategy 20 | Low | -1.24% | -2.54% | -12.90% |
Nutmeg | 2 | Low | -1.32% | -1.31% | -7.42% |
Wealthify | Cautious | Low | -1.75% | -3.76% | -11.02% |
Santander | Multi-index Fund 2 | Low | -2.75% | -3.42% | -12.65% |
Santander | Multi-index Fund 1 | Low | -3.57% | -6.40% | -16.96% |
This table displays performance over multiple timeframes across the past 2 years for a range of investment funds/portfolios. Performance has been calculated net of investment and platform charges. Risk levels have been classified based on Boring Money’s parameters, which can be found in the ‘key terms’ section. Performance figures have either come directly from platforms or been estimated using the value of fund assets, assuming frequent rebalancing.
Key terms:
Provider
The investment provider offering and managing the ready-made solution.
Fund/Portfolio
The name of the particular fund/portfolio held on the investment provider’s platform. This will typically include a mixture of cash, bonds and shares at different proportions depending on your chosen risk level. All funds/portfolios included in this article can also be classified as ready-made solutions.
Risk Level
The perceived level of risk associated to a ready-made solution. Boring Money assign each ready-made solution to a risk level, based on its equity allocation. For the purpose of this exercise, there are three risk levels. Investments with an equity exposure of under 35% are considered low risk, investments with an equity exposure between 35% - 75% are considered medium risk, and investments with an equity exposure above 75% are considered high risk.
Q2 2023
'2nd quarter'. The period between 1 April 2023 and 30 June 2023.
Net Growth
The total growth of a ready-made solution minus charges. Charges include both fees paid for managing the investment and fees paid for using the investment provider’s platform.
