Type: Oeic fund of funds
Aim: Income and capital growth by investing globally in a range of asset classes through a portfolio of investment funds
Minimum investment: Lump sum £5,000
Investment split: 35% overseas equities, 20% UK equities, 19% corporate debt, 5% sovereign debt, 11% other bonds, 2% property, 2% private equity, 1% absolute return funds, 4% other, 1% cash
Isa eligible: Yes
Charges: Initial 5%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 01392 410180
This Oeic fund of funds is an income version of Hawksmoor’s Vanbrugh fund. It follows the same global multi-asset approach as Vanbrugh, but with the additional focus on providing income, initially with a yield of around 4 per cent.
Discussing Hawksmoor as a fund management firm, Arch Financial Planning managing director Arthur Childs says: “Hawksmoor is an Exeter-based wealth management business that was founded at the beginning of 2008. As well as providing discretionary portfolio management services they run model portfolios and unfettered multi‑manager funds. Being based in the West Country rather than the city may be the reason that they like to describe its investment style as a common sense one.”
Childs says the newly launched Hawksmoor distribution fund is sub-fund of the PFS Hawksmoor Oeic and is the second multi-asset, multi-manager fund in its portfolio, This launch follows the Vanbrugh fund, which was introduced three years ago. “The fund has been launched with £3m in seed capital from a mix of existing Hawksmoor clients, staff and management. The investment objective of the fund is to provide income with the prospect of capital growth. Most IFAs have clients who would describe their investment requirements in just such a way,” says Childs.
The authorised corporate director for the fund is Chelmsford-based Phoenix Fund Services (UK), which is the ACD for 12 other funds. Childs points out that as it is referred to as PFS, it is not to be confused with the professional body for financial planners. “Dealing and registration functions have been delegated to South African administrative company, Silica Financial Administrations Solutions and BNY Mellon Trust & Depositary (UK) is the depositary of the Company,” says Childs.
Childs points out that the fund will be in the IMA Mixed Investment 40 to 85 per cent Shares Sector, formerly known as the Balanced Managed sector. “Its yield target will be at least 125 per cent of the FTSE APCIMS Income index, which currently yields around 2.7 per cent – although the expected initial yield will be around 4.5 per cent paid quarterly,” says Childs.
The fund will follow the successful pattern of the existing Vanbrugh fund. “It will have around 60 per cent of the same holdings but will use a higher risk profile to drive income returns. The fund will hold up to 85 per cent in equities with the balance in fixed income, property and absolute return funds.
“For IFAs who have previously only used unit trusts and Oeics with their clients, this and the earlier Vanbrugh fund could be a very useful introduction to the benefits of including exposure to investment trusts in a multi-manager fund,” says Childs.
The new fund is managed by Richard Scott, who has been chief investment officer of Hawksmoor since its launch in 2008, with Daniel Lockyer as co-manager. Scott and Lockyer are assisted by Ben Conway and Hannah Isaac. “Scott has managed fund of funds investments since 1995, first at the Exeter Investment Group, then with iimia and as a consultant to New Star. Lockyer joined Hawksmoor in 2009 having managed fund of funds investments since 2001,” says Childs.
Childs points out that the Vanbrugh fund, launched in 2009, has £32m of assets and has achieved a total return of around 60 per cent since launch just over three years ago compared to an average return in the Mixed Investment 20 to 60 per cent Shares Sector of just half that amount. “It has 42 holdings which is unusual for a fund of funds vehicle and this no doubt reflects the inclusion of closed-end funds,” he says.
Childs says investment trusts are very under-used by most IFAs and he feels Hawksmoor looks like a company that could help advisers get used to an investment structure that will need to be considered post-RDR. “The Vanbrugh fund is already available on a number of wrap platforms and I am sure that it will not be long before the new distribution fund follows it,” says Childs.
Scott and Lockyer are experienced at exploiting investment trust discounts and Childs feels this offers the potential for additional growth over and above the increase in net asset value. “It also means that they will be investing part of the fund in unloved sectors where the reduction in discount can reap the best rewards. According to the latest Defaqto Multi-Manager Report the asset allocation is entirely unconstrained apart from that imposed by the IMA sector. This is a fund, therefore, which should be held for the long term to get the full benefit of the investment trust element. This is a deliberate strategy as the fund is designed to have broad appeal, and to be a core long-term investment for those seeking income from an actively managed exposure to financial markets. The fund will at all times have a minimum of 40 per cent in equities and hold at least half of its assets in UK and continental European securities,” says Childs.
Looking in detail at the charges, Childs says: “The initial charge is 5 per cent and the annual management charge is 1.5 per cent, which is charged to capital. According to the latest Defaqto Multi‑Manager Report the total expense ratio of the earlier Vanbrugh fund is 2.48 per cent and I assume that the TER for the new fund will be similar. “Commission to IFAs appears to be a standard 3 per cent plus 0.5 per cent a year, but as an increasing number of IFAs are using wraps this is now somewhat irrelevant.”
Considering the potential drawbacks of the fund, Childs says: “Hawksmoor’s earlier fund took half of the annual charges from capital and the other half from income. With the distribution fund all of the annual charges are coming from capital. This is understandable but I am concerned that with a TER of just over 2.5 per cent the fund will have to work hard if the prospect of capital growth is to be realised once the income is paid out.”
Identifying the main competition that Hawksmoor could face, Childs says: “Only 12 per cent of all multi-manager funds are set up to provide a true income stream to investors. Hawksmoor therefore has a fighting chance to establish itself in this sector but this will not be easy given the strength of the names already in place.
“The main competition will be multi-manager income funds that produce a yield of over 4 per cent and at the same time have managed to produce an above average level of capital growth over the last three years. My list would be Invesco Perpetual distribution, Premier multi-asset distribution, Thames River distribution, HSBC open global distribution, Architas multi-manager income and Standard Life dynamic distribution. For overall performance with a lower income I would look to Invesco Perpetual managed income and Aberdeen managed distribution.”
Summing up, Childs says: “The Hawksmoor website promotes an image of a company that is secure in its own place in the scheme of things and where the lifestyle of the fund managers and other staff is as important as the financial rewards they might achieve. I think if I was promoting this company’s funds to my clients I would certainly direct them to the website as part of my recommendation.”
Childs adds that Hawksmoor has strong relationships with the legal profession. He points out that Hawksmoor chief executive John Crowley is a solicitor and feels for IFAs looking after trust monies, the culture of Hawksmoor would be very supportive.
Childs concludes: “I am sure that we will be hearing more of Hawksmoor as word gets out and I cannot really fault them on their new fund offering. At one level it may be a common sense distribution fund, but that is a bit like saying that cider is similar to lager. This could be just the refreshing taste of the South West that is needed to perk up some of our more staid client income portfolios,”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good