Aviva looks to mandates for flexibility

The multi-asset team at Aviva Investors will be adding a small amount of funds to its manager of manager portfolios to bring the flexibility of these portfolios in line with its fund of funds range.

The funds of funds, which invest at least 90 per cent in funds, already hold up to 10 per cent in segregated mandates that form the manager of manager portfolios. The manager of manager of portfolios will apply these limits in reverse, so at least 90 per cent will be invested in mandates and 10 per cent in funds.

Before April last year, the fund of funds were run by Fundquest while Close took care of the manager of managers portfolios. The multi-asset team says that unlike the previous managers, they can benefit from the scale of their combined assets, currently £3bn, making it easier for the fund of funds to invest in mandates.

The team says mandates provide access to a manager’s skills with lower fees than even the institutional share classes of Oeics. Mandates also allow the multi-asset team to reduce the manager’s ability to invest in areas to which it already makes its own allocations. In the case of the UK equity mandate run by Investec, which is held in the funds of funds, these areas are cash and global stocks.

One other mandate appears in the funds of funds, a global bond mandate managed by institutional firm Rogge. This mandate provides cost-effective exposure to lower-risk global bonds and is the only way to access this particular manager.

Aviva Investors senior portfolio manager Peter Fitzgerald says: “The ability to use mandates is driven by scale. If you run £400m to £500m in portfolios, that is not big enough to use mandates. But if you run £3bn, you are able to use mandates. Now that we have the fund of funds and manager of managers in-house, we can use that synergy and drive down fees.”