FUND FOCUS MANAGED BALANCED: Best performer over 5 years: Aviva L P SRI Managed Fund + 18% Worst performer over 5 years: Ark Life PIP Managed 2G -14.8% (Average -3.5%)

ONE MEASURE of the depth of the financial crisis over the past few years is that managed balanced funds – traditionally perceived as a safe, relatively conservative investment choice – have delivered a negative return on average over the last five years. According to MoneyMate, managed balanced funds returned an average of -3.5 per cent in the five-year period to December 9th.

The best performer in this category was Aviva’s L P SRI Managed Fund, which returned +17.8 per cent over the period. The fund, which is managed from London, is socially responsible investment fund (SRI), so takes social, ethical or environmental considerations into account when making investment decisions. This particular fund is primarily concerned with the social aspect of SRI. Among the “screening criteria” adopted by the fund when investing in stocks are whether the company derives above a certain percentage of its turnover from alcohol, gambling, military sales or cosmetics which are tested on animals. Tobacco companies and companies engaged in stem cell research are also banned. Jason M Josefs, a senior fund manager with Aviva Investors, says that rather than detracting from the return of the overall fund, one reason behind its strong performance over the last five years was the fact it was underrepresented in terms of BP stock, due to ethical concerns.

Approximately two-thirds of the fund is invested in equities, 25 per cent in bonds and the remainder in cash and other categories. “We use a combination of asset allocation and security selection to ensure return,” says Mr Josefs. “For example, we have a strong representation in North American equities and Pacific Basin equities, which, when denominated in euro, helps to deliver a strong return.”

The fund is benchmarked against the Mercer managed peer group average and is rebalanced on a monthly basis. Focus on dividend yields as an indicator of future returns is a core strategy, according to Mr Josefs.

A spokesman for Ark Life PIP Managed 2G fund, an AIB fund which came bottom of the list with a return of -14.8 per cent over the five-year period, said that the Ark Life fund was one of the PIP funds created in the mid-1990s to encourage investment in Irish companies, and as result holds a higher portion of Irish equities.