The extended risk, optimum risk and reduced risk funds were launched in 2004 as unregulated investments aimed at pension funds but were made Ucits III compliant last summer. The minimum investment was also reduced to £5,000 from £250,000.
The company says distributor status will make the funds more appealing to UK investors because without it gains are treated as income, so investors cannot obtain taper relief. Baring AM believes its risk-based approach to asset allocation and portfolio construction sets it apart from other multi-manager, multi-asset offerings.
The multi-manger team, headed by Sam Jeffries, analyses the risk and return characteristics of different asset classes based on 10-year estimates of returns. Asset allocation is tactical, based on getting the best returns for the lowest practical levels of riskBaring head of marketing Ian Pascal says its risk-based approach has been popular among pension funds that have needed to match risk and return profiles against their liabilities. He believes retail investors are catching on to the idea of seeing investment in terms of asset class and risk.
He says: “There is still a huge demand for single asset class funds but the evolution over the last two to three years has been to a broader asset mix. You have alternatives such as property and private equity that are becoming more accepted in the market so that they are not really alternatives at all these days.
“The difference with multi-asset investing is that fads come and go but increasingly asset allocation does add value. Asset allocation and strategic policy are our strengths – we look at the level of risk and return. That is why we have been successful in obtaining defined-contribution schemes investing in the funds. They are confident that they know how a fund will act.”