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&#39Rethink portfolios in closed WP funds&#39

The risk profile of with-profits funds has changed so much that clients&#39 overall portfolio profiles should be revisited, says Investec Fund Managers joint managing director Andy Sowerby.

Sowerby told PIMS delegates last week that IFAs should be revaluing the portfolios of clients invested in closed WP funds because many have little equity exposure and may no longer match clients&#39 investment requirements.

He said much of the estimated £118bn sitting in closed with-profits funds would not enjoy good performance bec-ause there is no incentive for them to perform beyond their immediate liabilities and consequently they are heavily wedded to fixed interest when inv-estors may have originally chosen the funds for a degree of equity exposure.

The NPI with-profits fund now has no equity exposure while Scottish Mutual&#39s fund has 28 per cent and Scottish Provident&#39s fund has 24 per cent.

Sowerby said cautious managed mutual funds had rep-laced with-profits in the minds of consumers as the vehicle for equity exposure with downside protection.

He said many clients should take advantage of penalty-fee transfer windows to move.

“Closed with-profits funds have little incentive to perform well. Their key concern is to match their liabilities. IFAs should be aware that the product risk profile has changed, so in many cases it will no longer meet the needs of clients,” said Sowerby.


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