Adviser-led discretionary fund manager P1 Investment Management is launching a range of five passive portfolios it is claiming to be the cheapest in the UK with a total cost of 0.19 per cent.
Built against five different risk profiles, the funds are based on P1’s hybrid model portfolios and will carry charges of 0.1 per cent with average underlying fund cost of 0.09 per cent.
P1 managing director James Priday says: “Our hybrid model portfolios have been running for five years. We have back-tested the passive portfolio performance according to our asset allocation at the equivalent risk levels over the five-year period and we are extremely happy with their positioning.”
The funds will be run by P1 head of portfolio management Will Dickson and investment analyst Adrian Margrie with support from Priday and head of research Quintin Rayer.
Believing the industry to be in need of more low-cost options to make investment more accessible and affordable, Priday says: “At an all-in cost of 0.19 per cent we believe they are the cheapest passive portfolios on the market.”
Blue Wealth Capital owner Raj Shah adds: “We need to see what the portfolios are investing in and what their strategy is. If they are competing against pure passive, as offered by iShares, for example, they can come in for as little as five basis points so then 0.19 per cent looks expensive.”
Capital Asset Management chief executive Alan Smith says while the drive towards greater transparency and lower costs is a sensible one, often “the devil is in the detail”.
He says 10 basis points for discretionary services is relatively low cost versus the competition and an average of 9bps for underlying funds also doable as “low cost”.
But he has concerns over Mifid compliance and the extent to which any additional transaction costs may affect the overall price when such a bold headline claim is being made.
He says DFMs are relied upon to have a view on markets and to buy and sell the underlying securities to take advantage of what they perceive to be market inefficiencies.
“That is the very nature of what they do, so there will be inevitably additional transactional costs and their underlying funds or ETFs will also undoubtedly have underlying costs. Even if it is too soon to know for definite – being a new launch – I would expect them to be able to estimate the expectations of trading activity and offer Mifid-compliant details of what all the underlying costs are likely to be.”