View more on these topics

DFM claims to launch cheapest passive portfolios in UK

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpgAdviser-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.

Passives Watch: What drove demand in 2017?

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.

Investment uncovered: How to pick a passive fund

“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.”

Recommended

Active vs Passive
2

Passive assets set to eclipse active in 10 years

Passive assets are on track to surpass active funds in 10 years, according to a new EY report. ETFs will benefit disproportionately from the shift because of their low fees and intraday liquidity in volatile markets, EY says. The Global ETF Research 2017: reshaping around the investor report found 67 per cent of the industry expects most […]

16

Fool’s gold: How Mifid II has revealed the true cost of funds

Mifid II reveals true cost of ‘cheap’ funds Investors may have been paying a third more in transaction costs than previously thought as new European regulation sheds a fresh light on the lack of transparency in fund fees. Advisers and platforms are quizzing fund groups on the nature of their transaction cost calculations as many […]

Jail banker

Fraudster jailed over £1.4m investment scam

A fraudster called the “controlling mind” in a £1.4m boiler room scam has been sentenced to three and a half years in prison. Samrat Bhandari, one of four men previously operating the scheme, also cannot hold a director position at a firm or company for 12 years. Bhandari, who was convicted after a 49-day trial […]

Carmignac mulls fund launch for UK investors

French asset manager Carmignac is considering launching an Oeic fund for UK investors as it solidifies its presence abroad. The £50bn fund house currently offers its range of nearly 20 Luxembourg-domiciled funds to UK investors but has not yet launched a UK-domiciled one. Carmignac opened a London office in 2012 which is headed by Maxime […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

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

  1. Good luck. To pay four or five proper investment professionals and cover the overheads, you’ll need between £0.5bn and £1bn AUM. It took Nutmeg about six years to get that much and they have burned through £60m of seed capital in doing so.

  2. It seems to be to be all about a race to the bottom.

    Cost is important, but it’s not the be all and end all some seem to think it is.

    An ongoing cost of say 1%pa doesn’t stop anyone accessing the market. They may not like the idea, but instead try showing them how much their bank effectively charges them for holding their savings on deposit.. i.e the margin the bank makes from holding that deposit, vs the amount they pay person whose money it is..

Leave a comment