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Balanced managed funds are much riskier than advisers think they are

Balanced managed funds have an average risk rating of eight or nine out of 10 which is far higher than the estimates of most advisers, according to Skandia research.

The research compares a survey of 1,300 advisers with volatility data over the past three years using the firm’s new managed fund analyser tool and Skandia says there is a mismatch in actual versus perceived risk.

Balanced managed funds were rated in a risk category of between four and six out of 10 by 87 per cent of advisers.

But the analyser tool suggests that most funds in the sector have a rating of eight or nine and 40 funds have the top rating of 10.

Eighty-one per cent of advisers risk-rated cautious managed funds as four or below, yet analysis suggests the most common rating is seven.

Skandia UK head of investment marketing Graham Bentley says: “Managed funds rarely perform in line with expectations due to the wide range of risk and returns that they offer.”

Skerritt Consultants investment manager Mark Waters says: “A lot of advisers think that managed funds are actually a lot more managed than they are.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Hardly surprising, is it? The average Balanced Managed fund has around 80% invested in Equities. How can that ever be deemed a ‘balanced’ investment approach?

  2. Is this a news story, or an advert for Skandia’s new analysis tool? The latter, I think! I am not advocate of balance managed funds, however this is an unfair reflection of the sector. Most asset classes will show higher than average volitility (compounded by market correlation) over the the last three years and thus will have a higher than expected risk score. I look forward to Skandia’s next revelation!

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