Type: Oeic fund of funds
Aim: Growth by investing globally in equities, bonds, commodities, foreign exchange and cash through a portfolio of Ucits III-compliant absolute return funds and money market instruments
Minimum investment: Lump sum £1,000
Investment split: 100% in a portfolio of Ucits III-compliant absolute return funds and money market instruments
Charges: Initial up to 5%, annual 1.5%
Commission: Initial up to 5%, renewal 0.5%
Tel: 020 7376 6600
The IFSL Blacksquare multi-manager absolute return fund is a fund of funds investing in Ucits III compliant absolute return funds and money market instruments.
Looking at the ways in which this fund is good for IFAs and their clients, Plutus Wealth Management IFA Robert Forbes says: “The fund is very simple to understand from a client’s perspective and importantly, I think there is a gap in the market for an absolute return fund that uses a fund of funds approach.”
He thinks the Blacksquare fund will enable portfolios to have a higher weighting in the sector. “I particularly like the fund’s exposure to a wide range of tried and tested underlying managers, with a broad spread of asset classes and varying trading styles. This gives me confidence, especially as it is a newly launched fund.”
Forbes also likes the fund’s fee structure. “There are no performance fees, simply a 1.5 per cent annual management charge.” He thinks this will help to make the product more marketable in the current environment where clients are often wary of performance fees generating the wrong investment behaviour from people who are managing their money.
“I know compelling arguments can be made for performance fees. However, I feel at this moment in time simplicity and transparency are more important to clients than encouraging fund managers to push their money hard.”
Forbes thinks the product literature is of a high quality and says his clients have remarked on not just the thoroughness of the content, but also the clarity too. “As an adviser, one of the most important aspects is knowing that the clients understand all the pros and all the cons of any investment, and Blacksquare have certainly achieved this,” he says.
Forbes observes that with more boutique style funds such as this, the minimum investment levels can be too high for many clients. “The minimum with Blacksquare is £1,000 which is easily within reach for clients as part of a fully diversified portfolio,” he says.
Discussing the adviser remuneration, Forbes says: “For advisers taking a product charge, there is a competitive level of commission as you’d expect.” He adds that an easy to understand product is also likely to appeal to fee-based advisers.
Turning to the potential drawbacks of the fund Forbes says: “I am normally wary of fund of funds style investments because of the additional costs, but the total expense ratio on this fund is 2.74 per cent. To be able to advise confidently with a higher charging fund, one must have a higher level of confidence in the investment strategy and the ability of the investment strategy to deliver.” He adds that the Blacksquare fund’s investment strategy is driven in part by reducing the overall volatility of investing in the absolute return sector, which he thinks will help provide value for money.
“Finally, and this is a little unfair, I’m always cautious with new funds. A track record is a useful tool and much better than theoretical back testing. In this instance though, I’m prepared to overlook the absence of history because it can be in part inferred from the funds that they are investing in. They do have track record, and I think the Blacksquare fund’s investment strategy appears robust.”
Considering which funds are likely to provide the main competition for Blacksquare, Forbes says: “A basket of alpha seeking funds would do the same job, although of course that would require monitoring by someone and that would incur a charge somewhere down the line. In my view, the Blacksquare fund is unique in terms of its strategy and multi-manager approach in this sector and so competition is difficult to assess.”
He adds that the Blacksquare fund will compete with both absolute return funds and other multi-managers for advisers’ attention. But, the very characteristic of an absolute return fund is to provide a positive return and above that of cash, and I feel that the likelihood of this occurring is greatest with a multi-manager approach.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average