A serial entrepreneur and angel investor in multiple startups across the UK, David Azzato is one of the biggest advocates of Bitcoin. He has been recognised as an expert in the cryptocurrency markets since their beginning, and he is currently Founder and Managing Part of London-based investment counseling firm David Azzato advisory. Azzato is widely appreciated for his strategic expertise and his youthful perspective.
Throughout 2020, the changing landscape of information and the explosion of cryptocurrencies have made markets more volatile than ever. With his savvy approach to data, David is providing strategic advice that keeps up with the curves venture capitalists can expect the market to throw in 2021.
Mr. Azzato’s financial blog offers free advice on Medium.
Azzato’s advice for cautious investors
Some investment funds will be more appealing for risk-averse investors. These funds shield investors from the most severe financial effects of downturns in the market. That doesn’t mean that they come with no risk at all. It simply means that these prime picks for cautious investors offer the same level of asset protection as other funds in their class with added opportunities for growth that other funds do not afford.
Rathbone Strategic Growth Portfolio — This fund led by David Coombs targets risk and then seeks to maximise returns with a projected yield of cash plus 3 to 5% per annum. Over the last 20 years, the fund has achieved reliable returns by focusing on well-managed trusts and boutique investments, always seeking to find secure safe harbors for cash in any financial storm. In David Azzato’s view, this fund is an excellent choice for investors who need to protect their cash but continue to look for modest growth.
Newton Real Return — A global approach to capital preservation is the driving principle of Newton Real Return. Open to UK and US investors, this fund does not limit itself by geography or market sector. It provides asset class flexibility and simple hedging so investors can enjoy maximum long-term returns. Newton Real Return maintains a transparent portfolio of liquid investments.
David Azzato assesses the attributes of this fund in very simple terms: Newton Real Return’s portfolio is liquid, so it’s easier to make changes in investments if the market takes an unexpected downturn or if some investment by the fund needs to be reconsidered. The fund’s agile approach to capital management makes a big difference in how shareholders do overall by lowering their risk but still providing opportunities for good returns.
Vanguard LifeStrategy — The Vanguard funds provide investors with conservative investments without hemming them into a conservative portfolio indefinitely. Vanguard LifeStrategy funds allow their investors to decide how they wish to allocate their investments between stocks and bonds and then let the fund do the work. Every Vanguard LifeStrategy fund invests in the broadest possible index, giving investors access to the earning potential of thousands of UK, US, and other international equities, with exposure to the most profitable market segments and sectors.
David Azzato’s comments that the Vanguard LifeStrategy funds are appropriate for investors who value security over unpredictable but potentially high gains. Because Vanguard LifeStrategy investors are less likely to lose their investments, they are happier with their long-term results.
David Azzato’s advice on investing in bonds
David Azzato points out that investing in bonds is not always for the risk-averse. Some bond funds are a high-risk, high-potential return option for investment.
Royal London Sterling Extra Yield — Here is an example of a bond portfolio chosen to maximize income potential rather than to minimize risk. This fund aims to achieve a gross redemption yield (GRY) of 1.25 times the gross redemption yield of the FTSE Actuaries British Government 15 Year index. The fund achieved a 37.8% return over the five years ended in mid-2020 without any year-on-year losses. (It is important not to confuse this fund with the company’s IA Sterling Strategic Bond Fund, which had a 26.5% return over the same period but one year with a net loss of 2.1%.)
Royal London Sterling Extra Yield does not deliver the same results every year. There have been markets in which it has been barely profitable. Azzato points out that it is important to understand the risks and potential for this investment and not simply to suppose that because it is a bond fund it is always a secure investment. This particular fund has been consistently profitable over the last five years, but, as many investment vehicles advertise, past performance is not a guarantee of future returns.
CVC Credit Partners European Opportunities — A basic principle of investing in bonds is that the value of bonds goes up when interest rates go down. What protects bond investors when interest rates go up?
Azzato reminds investors that high-yielding bonds are resilient in a high-interest rate environment. CVC Credit Partners European Opportunities focuses on maximizing cash yield from performing investments. They invest primarily in senior secured loans and bonds with lower volatility and higher liquidity. They look for trading opportunities in primary markets.
In other words, CVC Credit Partners European Opportunities looks for unusually good buys in every market. They remain grounded in asset-conserving investing principles as they look for unusual opportunities for their investors. Azzato evaluates this fund as an excellent opportunity for investors with a mind for asset preservation who are willing to take their gains over the long term.
Azzato’s advice for income investors
Some investors aren’t looking for long-term income growth. Their objective is maximizing the income they can earn right now. For these investors, David Azzato commends three UK growth funds. But Azzato cautions that getting more income now can mean getting less income in the future.
Schroder Income Maximiser — The Schroder Income Maximiser Fund aims to provide investors with a 7.0% return. In the most recent year, Azzato points out, the fund has yielded 6.8%, which tells investors that the fund has chosen its portfolio to deliver results without taking on unusual risk.
The Schroder Income Maximiser funds invest in British companies such as Centrica, Drax, and Pearson. it looks for companies that are generating positive cash flows and that have the potential to increase those cash flows over time. But the company’s approach to stock values bears a little explanation.
As Schroder Income Maximiser’s investor guidance puts it:
“While the value style has had a deep and protracted period of underperformance, we take comfort in the fact that operationally, value stocks are performing as expected. The data suggests value’s underperformance is a result of value stocks not being re-rated as much as they usually would be. The longer it takes for the market to reward operational improvement, the more outperformance is being stored-up for the future. In previous commentaries, we have referred to this as the metaphorical elastic band – it stretches between market valuations and their long-term average, between value stocks and their growth counterparts, and fundamentals and valuations. The further it stretches, the greater the opportunity. We believe that the long-term opportunity for patient value investors in the UK today is enormous.”
Schroder Income Maximiser seeks to deliver dividend income now with outstanding capital appreciation over the longer term. It’s an ideal combination of goals for investors seeking to increase current income from their portfolios.
Columbia Threadneedle UK Equity Income — Steady income. Capital growth. That is the balance of investors who want to see income now but who also want to see greater income in the future. Columbia Threadneedle UK Equity Income maintains a portfolio of stocks in 45 to 60 UK companies, most of the larger companies in the FTSE All-Share Index. These companies have a ready market for shares with predictable dividends and share prices. That does not mean, Azzato tells us, that every company in this equity income fund is paying dividends right now.
Columbia Threadneedle UK Equity Income balances the potential for higher stock prices with immediate income from dividends. The fund does not exclude higher-than-average opportunities for stock price growth just to maximize current dividends. Azzato says that this is the speculative proposition of the fund: Future stock prices cannot be guaranteed, but the fund seeks to optimize the combination of current income and future portfolio growth.
Murray International — Here is David Azatto’s choice of a sensible contrarian fund. In business since 1907, Murray International scans multiple sectors and segments of global markets for strong companies with strong track records of paying dividends. The fund also invests in currencies in emerging markets as a way to more completely hedge its portfolio. Azzato sees this fund as catering to multiple options and opportunities, bringing investors myriad options for profit.
Azzato on UK-Only Options and Opportunities
David Azzato gives high marks to two funds that invest exclusively in companies based in the United Kingdom.
Investec UK Alpha — Investec UK Alpha puts at least 50% of its portfolio in the FTSE 100. The fund manager Simon Brazier believes, Abazzo says, that focusing on short-term gains is not the best way to go about things and that UK investors are best served by investing in UK companies they can know, understand, and analyze within a culture of corporate governance on which they can depend. Brazier also serves on the Quality Team at investment fund Ninety-One.
Brazier describes Investec UK Alpha as style-agnostic. It does not limit itself to any single investment theme, such as market-cap or growth driver. This gives the fund the flexibility to outperform the market.
Fidelity Special Values — This Fidelity fund invests in UK companies on a time-honored principle: Buy well-priced stocks. The fund seeks British companies whose managers are not fully appreciated or whose value has not been recognized in the market.
This approach to investing does not deliver any “sure bets.” Fidelity Special Values is actively managed, thriving on and profiting from volatility, focusing on trades at a discount from what is fair and reasonable. And with this particular fund, investors save on trading costs, giving them more money for other investments.
Azzato on growth funds
David Azzato preaches that strong growth in stock values requires nimble stock selections. Since the greatest gains are made from the smallest companies, growth funds need management with deep industry knowledge and timely stock research. Here are two of his recommendations for investors in the UK.
Baillie Gifford Global Discovery —David Azzato describes this fund as exciting. He calls it volatile. And he cautions investors that it is not the best destination for investment funds intended for immediate income.
Baillie Gifford Global Discovery Fund invests 30% of its portfolio in healthcare and 30% of its portfolio in technology. Both sectors sometimes produce stocks with stellar growth rates. But Azzato counsels that this fund is not for the faint of heart. It is a superior choice for long-term growth but the downside is the potential for short-term losses. Investors should stay away from this fund if they are not making long-term investments.
Marlborough Nano Cap — This fund seeks growth greater than the FTSE by investing in smaller UK firms with strong growth potential. Azzato sees it as a superior opportunity for adding high-risk, high-reward equities to investor portfolios, but cautions that no investor should place an entire portfolio in any nano-capitalization fund. Investing in venture capital requires a different set of information and skills. Investors should also take note of the funds’ front-loading fees in assessing their value in their portfolios.
David Azzato’s most important advice for all UK investors
Now that you have been introduced to Mr. Azzato’s evaluations of investment opportunities for investors in the UK, it is important to review his most important advice for investors anywhere:
What works well in someone else’s portfolio may not work in yours.
You need to understand your investment abilities. Some people have the time and inclination to keep up with market information so they can manage their investment portfolios. Some people have neither. Every investor benefits from guidance from experts. What you don’t want to do is to make investment decisions based on a “hot tip” or trying to follow the crowd.
David Azzato likes to say that making your own decisions is always your best move. But David Azzato is available to provide you with excellent information and advice for making them.