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Fidelity lifespan Fofs in bid to smooth volatility

Fidelity is seeking to transform the UK investment market with US-style limited lifespan funds of funds which aim to smooth volatility by making lifestyle-type switching through asset classes.

The three fettered wealthbuilder target funds will invest in Fidelity equity funds at their launch in May and gradually increase their exposure to bond funds before moving towards cash near their end dates – 2010, 2015 and 2020.

When they hit these points, the funds&#39 asset mixes will remain largely the same, all-owing cautious investors to hold their investment and draw income.

Manager Richard Skelt says there is a choice of 90 Fidelity funds but he expects each wealthbuilder fund to invest in no more than 15 funds, a figure likely to fall as he moves through asset classes.

The initial split between domestic and foreign funds will be 50/50 but Skelt can adjust exposure and weighting without having to meet benchmark requirements.

Fidelity expects to attract inflows during the first half of each fund&#39s life but believes this will pick up again nearing the end. It plans to launch further tranches.

Initial charges are 3 per cent until June 30, when it switches to 3.25 per cent. The 1.5 per cent annual management fee will fall to 1.25 per cent as the asset mix changes. Commission is 3 per cent, with 0.5 per cent trail.

Head of IFA business Stuart Holah says: “What is not going to work at the moment is waiting for the markets to recover. We are taking something of a revolutionary app-roach which will match our strategy with that of investors.”

Bates Investment Services head of investments James Dalby says: “Managing asset allocation properly is difficult and these funds could be the solution for many IFAs. It is a very robust proposition.”


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OFT urged to see &#39monopolistic nature&#39 of market

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