View more on these topics

7IM adds passives to range

Seven Investment Management has introduced a range of risk-graded funds of funds that use passive investments such as exchange-traded funds rather than actively managed funds.

The asset allocated passives range was designed to provide investors with access to Seven’s tactical long-term views and short-term strategic asset allocation at a lower cost than the existing funds, which invest in actively managed funds. The AAP range comprises adventurous, moderately adventurous, balanced and moderately cautious portfolios.

The asset allocation of these funds will be almost identical to the company’s existing portfolios but ETFs will be used because of their greater liquidity and lower costs. Using ETFs removes the need for Seven to make a charge for selecting underlying managers, so this also reduces the annual management charge. As the new funds grow, the costs will also reduce further as the funds will be able to buy baskets of equities to track indices rather than pay ETF charges. The fixed costs will also become proportionately smaller.

According to Seven, lower costs is not the only benefit of the AAP range. It says the asset allocation will be more precise because ETFs are not guided by human emotions such as greed and fear that lead active fund managers to make their decisions. Active fund managers may decide to invest in cash or they may drift away from their investment style, which makes asset allocation difficult for multi-managers. Passive investments remove these problems, as they remain 100 per cent invested all the time in an index.

AAP funds could be useful for IFAs who are looking to outsouce asset allocation decisions but who are put off some multi-manager funds by the higher total expense ratios. However, they are not a panacea and are not intended to replace portfolios of actively managed funds, such as Seven’s existing funds.

Investors would need to weigh up the advantage of the new funds’ lower costs against outperformance beyond an index that active managers can deliver at a higher cost.

Recommended

House proud

Is equity release still only used by homeowners who need to supplement their income in retirement rather than as a planned release of lump sums for planned expenditure?

Skipton BS cuts BTL LTV to 75%

Skipton Building Society has cut its maximum loan to value on its buy to let products from 85 per cent to 75 per cent with immediate effect.

Share the load

There are positive steps that each of the key parties can take to help struggling borrowers. Where clients cannot remortgage their way out of trouble, brokers may be faced with two options: Sympathise but explain that you cannot help because of the credit crunch. Advise them to discuss payment difficulties with their lender and suggest […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com