Apollo Multi-Asset Management believes the growing popularity of discretionary fund management among IFAs as due to perceptions that a DFM is better than a fund of funds.
The company, which is preparing to launch its own DFM service, says some advisers looking to outsource investment decisions are choosing DFM over fund of funds because it appears more tailored towards the individual.
Apollo says while it does not understand why IFAs want access to its skills through a DFM service when the existing fund of funds structure is more tax-efficient, it is happy to meet demand.
Fund manager Tom McGrath says many advisers are outsourcing investment management to save time and avoid damaging client relationships in the event of their own decisions going wrong.
He says some advisers may think it sounds better to pitch DFM to clients as a specialist investment manager building a portfolio for them, monitoring it and making changes as necessary, rather than saying their money will be going into a fund of funds. But, he adds, DFM and funds of funds often do the same thing using the same process.
Apollo is in discussions with various wraps and platforms in relation to its DFM, with the intention of using their back-office software. The firm is also working with IFAs and expects to roll out its service in the second quarter.
McGrath says: “Building portfolios has occupied a lot of IFAs’ time and if they give it to us, they get a dedicated investment professional with the same level of trail as if they had built their own portfolios.
“Discretionary fund management may sound better than a fund of funds, but in reality we will do the same role for both.”