Risk rated funds set to replace ABC funds within 5 years, says survey
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Risk rated funds with set volatility targets are increasing in popularity and will replace active, balanced, and cautious funds within the next five years, according to a Skandia survey.
The survey of over 1300 advisers reveals that 63 per cent currently recommend ABC funds to clients and of these 68 per cent believe risk rated funds will eventually replace these old model funds. 80 per cent of these advisers believe that it will take less than five years, but 62 per cent believe it will only take three years for the shift to occur.
Skandia head of investment marketing Graham Bentley says: “Risk-rated funds, often better match investors’ expectations than ABC funds do, in no small part by rebalancing daily so that they stay in line with their respective volatility target, providing a better risk-matched solution than ABC funds.
“Although appropriate for some investors, ABC funds might be past their sell-by-date. Risk-rated funds deliberately aim to do the job their predecessors have never been able to do - control the risk.”
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Readers' comments (2)
You must be joking | 26 Apr 2010 1:49 pm
In all honesty, I think "ABC Funds" have already been replaced in favour of risk-rated (or volatility driven) portfolios (not risk-rated funds in our case) by many forward thinking IFAs.
I fail to see how any IFA, in the current climate, can recommend a fund from, say, the cautious managed sector, where, by difinition, this could have anywhere between 0% and 60% exposure to equities and, more importantly, can change that exposure at the drop of a hat.
How on earth can one go back to a client and say "well, the fund had 20% exposure when you invested, but 3 months later the manager changed and the exposure was increased to 58%"... Makes no sense!
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Jon Haslam | 23 Jul 2010 11:08 am
More evidence that the world is changing to our waying of doing things.
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