When designing the CDI portfolio range, the FAS Investment Committee aim to provide a diverse range of strategies designed to fit the varied needs of our clients; however, market conditions themselves can sometimes dictate an increased demand for a particular portfolio solution.
This was the case at the end of 2020, when global financial markets were grappling with the impact of the Covid-19 pandemic. At this time, central banks around the World cut interest rates aggressively to combat the economic downturn, with the Bank of England reducing the base rate to just 0.1% in March 2020. Savers holding significant cash deposits, or those who use cash interest to boost other income sources, were left facing the choice of either accepting the ultra-low levels of interest from cash, or seeking alternative options. This led to increased demand for a lower risk discretionary mandate, designed to provide attractive returns when compared to cash deposit, and led to the inception of the CDI Cautious portfolio in January 2021.
CDI Cautious in detail
The CDI Cautious portfolio primarily invests in fixed income investments, focusing on short-dated Corporate and Government bonds, together with Money Market deposits, an allocation to Global and UK equities and alternative investments. The aim is to generate an attractive level of natural income, together with some capital appreciation over time, whilst maintaining low levels of volatility. As with all CDI portfolio mandates, the FAS Investment Committee are free to allocate the portfolio across different geographic sectors or regions; however, the portfolio mandate dictates that no more than 20% of the portfolio can be held in equities.
Currently, almost two-thirds of the portfolio is invested in fixed income, with most of this allocation investing in global, rather than UK, bonds. In line with the current strategy adopted by the FAS Investment Committee across the CDI range, the bond allocation is focused on short-duration bonds, where the period to redemption is five years or less. This approach aims to minimise the impact of inflation risk, whilst still capturing the attractive income yields available. Given the risk profile of the CDI Cautious portfolio, the fixed interest allocations are almost entirely held in investment grade bonds, with only a small allocation to high yield issues.
Currently, over 16% of the portfolio is held in cash, with most of this allocation held in Money Market funds. These funds aim to preserve capital and produce modest returns by investing in short-term corporate and government debt, certificates of deposits and other short term debt instruments, and typically offer slightly better returns (net of fees) than overnight cash deposit rates.
Whilst the maximum allocation to equities is 20%, the portfolio currently holds just 14% in equities, spread geographically across the UK, North American, European and Asia Pacific regions. As active fund managers can focus their portfolios on more defensive and value positions, the FAS Investment Committee prefer to allocate a higher weight to actively managed funds in this portfolio, with just over one-quarter of the current equity allocation held in passive funds. Despite the higher allocation to active funds, the portfolio carries a competitive ongoing fund charge of just 0.32% per annum.
Portfolio Performance
Measuring performance over the last three years to 12th May 2026, the CDI Cautious portfolio (shown in black on the graph below) achieved a total return of 25%, which is comfortably above the returns achieved by the sector benchmark, the IA Mixed Investment Sector 0% to 35% shares (shown in pink). Also shown on the graph below is the Bank of England Base Rate (green line) which represents cash returns over the same period.
Given the investment approach and objectives of the CDI Cautious portfolio, the FAS Investment Committee pay particular attention to the impact any changes to the portfolio have on portfolio volatility, and maximum drawdown. As shown in the graph below, the CDI Cautious portfolio has produced strong risk adjusted returns, not only outperforming the representative benchmark over the last three years but keeping the level of volatility around 25% less than the volatility displayed by the benchmark over this period.
Portfolio appeal
The CDI Cautious portfolio was designed to meet the needs of those seeking returns that are superior to those available on cash deposit, without being exposed to significant levels of investment risk. Given the asset allocation, the portfolio maintains an attractive natural income yield, currently yielding 4.42% per annum.
The appeal of this portfolio is not, however, confined to investors with a lower appetite for investment risk. The portfolio also lends itself well as a smaller satellite portfolio to a more balanced mainstream core portfolio for specific client circumstances. For example, an investor heading towards retirement may wish to carve out a section of a larger pension portfolio into assets with lower volatility, which will be drawn in the short to medium term through Flexi-Access Drawdown.
The CDI Cautious portfolio may also be an ideal option for corporate investments, where directors look to keep surplus funds held within a business productive, and for Trusts, where Trustees seek an attractive level of income for a life interest beneficiary whilst limiting portfolio volatility.
Time for a fresh approach
If you hold surplus savings, that you wish to keep productive without taking excessive risk, or wish to diversify part of a larger portfolio into lower risk assets, then the CDI Cautious portfolio may be an option to consider. Likewise, defensively minded investors who hold portfolios through alternative managers, should regularly review both the performance of their investments, but also the level of risk to which they are exposed. Speak to one of the team to start a conversation about the CDI Cautious portfolio, or any of the portfolios in the range.
