The F&C lifestyle growth, F&C lifestyle balanced, F&C lifestyle cautious and F&C lifestyle defensive funds are tailored to fit the risk and return profile of a certain type of investor and will be rebalanced quarterly to ensure they do not deviate from their risk profile. They will comprise 15-25 holdings and will hold no more than 15 per cent in any one fund.
F&C’s multi-manager team will select the most appropriate funds to fit each risk profile using the same process – traffic light analysis – as the company’s existing multi-manager funds. Traffic light analysis enables F&C to screen over 20,000 funds on a monthly basis, using 86 time periods. It looks at six characteristics – performance, volatility, risk of loss, excess return in relation to risk, correlation and actual return. The results from each report are then split into three categories – red, amber and green. Red funds are consistent underperformers that are not worthy of further consideration, amber funds have mixed performance and may be worth considering at a later date, while green funds are consistent outperformers that are worthy of consideration.
As a special offer, F&C is also offering free investment protection to investors in the funds until the end of the year. This protects the value of the assets for beneficiaries upon the death of the investors, so that the estate will receive the greater of the current value of the assets and the original amount invested subject to a maximum shortfall of £150,000. To qualify, investors should be aged 18-79 with at least £5,000 in the lifestyle funds.
According to F&C, lifestyle funds are popular in the US and could become popular in the UK, partly because regulatory requirements mean advisers must ensure clients’ investment portfolios stay suited to their risk profiles. However, the funds may not have much appeal to advisers who prefer to take care of asset allocation themselves.