The company, which is preparing to launch its own DFM service, says some advisers who are looking to outsource investment decisions are choosing DFM over fund of funds because it appears that DFM is more tailored to the individual.
Apollo says it does not quite understand why IFAs want access its skills through a DFM service when the existing fund of funds structure is more tax efficient, but it is happy to meet adviser demand.
Apollo fund manager Tom McGrath says many IFAs are outsourcing investment management to save time and avoid damaging client relationships in the event that their own investment decisions go wrong.
He says some advisers may think it sounds better to pitch DFM to clients as a specialist investment manager building a portfolio for them, monitoring it and making changes as necessary, rather than saying their money will be going into a fund of funds. But, he adds, DFM and funds of funds often do the same thing, using the same process.
Apollo is in discussions with various wraps and platforms in relation to its DFM, with the intention of using their back office software. The firm is also working with IFAs and expects to roll out its DFM service in the second quarter.
McGrath says: “Building portfolios has occupied a lot of IFAs’ time and if they give it to us, they get a dedicated investment professional, with the same level of trail as if they had built their own portfolios.”
“Discretionary fund management may sound better than putting money into a fund of funds, but in reality we will do the same role for both. In effect, the Apollo funds are just big discretionary portfolios.”