View more on these topics

Adviser Fund Index – Selection of the fittest

On May 1 last year, the rules regarding the use of funds of funds in the AFI changed. Previously, panellists could only include multi-manager funds if they were an integral part of their in-house investment model.

Since then, funds of funds can be included regardless of their function in the model, although they cannot make up more than 30 per cent of each portfolio.

Not all panellists have taken advantage of this rule change, however, and eight out of 10 panellists that responded to a recent survey say they continue to avoid funds of funds.

Some regard funds of funds as letting someone else do their job for them while others say they are a useful tool in getting exposure to alternative asset classes and more specialist areas.

Kypros Charalambous, associate director at Barclays Wealth and AFI panellist, does not normally hold funds of funds in the AFI. However he does hold the £55.54m SVM global opportunities fund, managed by Donald Robertson and Colin McLean.

The SVM global opportunities fund consists of a blend of single-country funds, hedge funds, private equity funds and other specialist funds. Charalambous says it gives him access to some of the “spicier areas”.

He says: “I use the SVM global opportunities fund in the index across all three portfolios. It gives me something different. It has alt-ernative exposure, access to hedge funds, derivatives and structured products. It tends to complement how I put portfolios together.”

Similarly, David Wynne, associate director of Bentley Jennison Financial Management, looks to funds of funds for access to alternative assets. He says: “We are fans of multi-manager, particularly because it allows us access to alternative assets. We very much come from the diversified approach.

“We not have the resources to analyse the whole of the hedge fund market, for instance. We lean on their fund of fund managers ‘resources and we analyse them to see why they choose the funds they choose. It is a far easier way of us getting access to alternative assets.”

Wynne has taken the maximum stance of 30 per cent exposure to funds of funds in both his balanced and cautious AFI portfolios.

He explains: “What we are trying to do is protect on the downside. That protection lessens as we go up the risk scale.”

Unlike Wynne and Charalambous, Hilary Coghill, investment director at City Asset Management, does not use funds of funds in the AFI. She says City Asset Management selects the funds itself.

“We are making selections, so we do not need to use funds of funds,” Coghill explains. “Our clients might say, ‘Why are we paying you when we can go and buy a fund of funds direct?”


Insurers get it in neck over Omo materials

The FSA pulled no punches this week with its stark warning to life companies that open market option standards for annuities had to dramatically improve after discovering shocking numbers of consumer correspondence failings.

Dodging torpedoes

Investment flows are undoubtedly polarised at the moment. Some investors are seeking high potential returns through emerging markets, specialist funds and singlecountry funds such as India and Russia. Others are seeking the safe haven of cash or more recently bonds. The latter, as I have mentioned before, look good value.

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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