Can this top-performing, Warren Buffett-inspired fund help you to a dream retirement?

There are a few ways in which you can improve your retirement prospects via the stock market. One option, of course, is to pick individual stocks yourself.

For those who lack the time, energy or interest, however, an alternative is to buy into a fund managed by a professional investor — an example of which would be Keith Ashworth-Lord’s CFP SDL UK Buffettology Fund.

As it sounds, this fund adopts the strategy of investing legend Warren Buffett and buys undervalued, quality businesses for the long term. 

Why have I picked this particular fund? To be clear, the fact that it follows the teachings of Buffett doesn’t make it special — many professional money managers attempt to do exactly the same thing. What does makes it special, apart from its name, is the way it’s performed for holders. 

So it’s done well then?

You could say that. Since launching back in 2011, the fund has achieved a cumulative gain of just under 235%, according to its November factsheet. For comparison, the median performance of its peer group of funds (those in the UK All Companies Sector) — has been a bit under 82%. 

A quick scan down its major holdings explains why. Occupying the first and second spots are multi-baggers Games Workshop and AB Dynamics. Travel firm Dart Group — a beneficiary of the demise of Thomas Cook — is the third biggest holding. Further down, we have clothing stalwart Next and credit checking firm Experian, both of which have been charging ahead recently.  

Other things I like about this fund are the fact that it’s geographically diversified around the world (that is, not too dependent on stocks in the already-expensive US). It’s also concentrated (just 35 holdings), implying that Ashworth-Lord only invests in his best ideas, albeit at greater risk. Lastly, a sizeable proportion of assets are invested in smaller companies that have the ability to grow at a faster clip than most blue-chip stocks.

Are there any potential downsides?

I can think of a couple. 

First, just because the Buffettology fund has dramatically outperformed its peer group since launch is no guarantee that it will continue to do so (note Neil Woodford’s experiences this year). Remember that stocks have generally been in fine form since 2009 and many younger investors are still to experience a sustained bear market. The fact that the fund is popular makes it liquid (easy to buy or sell) and therefore susceptible to large outflows when the next crisis arrives as people sell what they can rather than what they really want to. 

Second, it’s important to bear in mind that investing in a fund managed by a human rather than a computer (as you would with ‘passive’ exchange-traded funds) usually costs a lot more. Ashworth-Lord’s vehicle has an ongoing charge of 1.23%. That’s high compared to peers and staggeringly so compared to a simple FTSE 100 tracker (0.07%). The question to ask, therefore, is not whether the Buffettology Fund contains great stocks, but whether the above-average returns it generates are worth the fee. So far, it’s been justified. Now re-read my first point. 

Since costs are one of the few things we can control, I’d personally continue to favour cheaper options for the bulk of my ‘fund’ portfolio. That said, diverting some money into the Buffettology Fund could still set you up well for your golden years.