Liontrust Special Situations, Troy's Trojan fund and Invesco Perpetual Global Targeted Returns would all be complementary in a portfolio and could help to increase diversification while boosting long-term gains, according to Tilney Group's Jason Hollands (pictured). 
This comes as the third instalment of our series, in which we ask investment professionals for their perfect blend of three funds that investors could hold and sleep soundly at night. Previous articles have featured Informed Choice's Martin Bamford and Architas investment director Adrian Lowcock.
In the below article, the managing director explains what each of his three choices can add to investors' portfolios and why they work well together.
Liontrust Special Situations
First up is Liontrust Special Situations, which is headed up by FE Alpha Manager duo Anthony Cross and Julian Fosh. Incidentally, the five FE Crown-rated fund scored highly in a recent FE Trustnet study, which focused on the top-performing value and special situations funds to have navigated entire market cycles.
Over the last five years, the £2.8bn fund has returned 87.68 per cent compared to its average peer and benchmark's respective returns of 69.67 and 59.63 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
Hollands said: "Despite a high weight to smaller companies which many might be considered riskier, this UK equity fund has long exhibited incredibly attractive risk/rewards characteristics with consistent outperformance but low relative volatility.
"Over the last three years annualised volatility has coming in at 10.6 per cent per annum compared to 14.2 per cent from the FTSE All Share index.
"Managers Anthony Cross and Julian Fosh have an impressive career track record in the sector of outperforming the market in 68 per cent of months they have run money in the UK All Companies sector but rising to 88 per cent in months when the market declined.”
The managing director said the fund's ability to protect on the downside is due to the managers' Economic Advantage process, which focuses on companies with difficult-to-replicate attributes such as ownership of intellectual property, business models with high recurring revenue streams and strong distribution channels.
Liontrust Special Situations has a clean ongoing charges figure (OCF) of 0.87 per cent.
Troy Trojan
Next on Hollands' list is Troy's Trojan fund, which is benchmarked against the FTSE All Share and resides in the IA Flexible Investment sector.
FE Alpha Manager Sebastian Lyon, who has been at its helm since 2001, is renowned for his defensive positioning and the fund has therefore experienced a 10-year maximum drawdown (which measures the most money lost if bought and sold at the worst possible times) of just 9.81 per cent compared to its benchmark's drawdown of 41.09 per cent.
Despite its focus on downside protection, the £4.2bn fund has still managed to marginally outperform the FTSE All Share over the last decade with a total return of 88.8 per cent. As to be expected, it has underperformed its benchmark over shorter periods of time as the fund comes into its own during falling markets.
Performance of fund vs benchmark over 10yrs
Source: FE Analytics
"This is a multi-asset fund that investors with strong focus on capital preservation that invests across blue-chip equities, fixed income (including index linked bonds), gold and cash," Hollands explained.
"The fund is currently very defensively positioned reflecting the management team at Troy Asset Management’s concerns over asset prices, with 29 per cent of the fund in cash and near cash instruments.
"The conservative nature of the portfolio means it will lag in sharply rising markets as we have experienced in recent years, but this fund should weather tougher markets and periods of uncertainty well.
"The defensive and diversified nature of the portfolio has led to very low levels of annualised volatility of around 5.3 per cent while delivering positive returns.”
Troy Trojan has a clean OCF of 1.05 per cent.
Invesco Perpetual Global Targeted Returns
The final fund on the list, Invesco Perpetual Global Targeted Returns is one of the largest investment vehicles in the IA Targeted Absolute Return sector.
Hollands pointed out that the £10.4bn fund is one of the main challengers to the behemoth Standard Life GARS fund which, having fallen on tough times recently, saw some members of its team move to run Invesco's offering in the sector.
"It’s a multi-strategy, absolute return fund which aims to deliver a positive total return in all market conditions over a rolling three year period with a target gross return of 5 per cent per annum over 3-month Libor and less than half the volatility of global equities," the managing director said.
"The fund is essentially an umbrella for a diverse basket of trades encompassing currencies, credit markets, equities, commodities and interest rates which currently number 29 as well as cash balances.
"The fund has delivered positive returns net of fees in each year since inception with annualised volatility of 4.4 per cent, well below that of either global equity or fixed income markets.
"Given inflated bond prices and yields that lag inflation, this fund might be considered as a low volatility alternative to fixed income within a diversified portfolio.”
Since its launch in September 2013, the fund has returned 22.21 per cent and has done so with a 3.57 per cent maximum drawdown.
Performance of fund since launch
Source: FE Analytics
Invesco Perpetual Global Targeted Returns has a clean OCF of 0.87 per cent.