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Investment Uncovered: How Openwork makes investment decisions

Continuing this series looking at how firms make their investment decisions, we speak to restricted advice network Openwork’s wealth director Mike Morrow

 

Can you explain your approach to investment management? 

Openwork advisers are selling multi-asset portfolios, not individual funds. Our advisers don’t want to be spending time on manager/fund selection; they add value in holistic financial planning. We are a bit different to some companies in that we have our own asset manager and authorised corporate director, Omnis, which runs our fund range. 

We bring in quality fund managers on institutional mandates – for example, Schroders and Woodford Investment Management run equity funds for us. We do the administration for these funds and hold the assets on two investment platforms, IFDL and Zurich.

Omnis is our captive fund manager and it oversees the institutional mandates – it selects the fund managers and manages them. We are also responsible for the day to day fund accounting, so we have total visibility of what the managers are doing at fund level. 

We have discretionary permissions that allow us to offer the Omnis Managed Portfolio Service which invests solely in the Omnis funds using generic models aligned to cautious, balanced and adventurous client risk profiles. These are managed by our chief investment officer Toni Meadows and his team. Separately where clients have very high net worth and/or capital gains tax positions, we tend to use bespoke discretionary portfolios, and for those we utilise 7IM or Quilter Cheviot. 

We also have the Graphene range of advised model portfolios. We blend single asset class funds from Omnis into multi-asset portfolios. These models are auto-rebalanced every six months to correct any portfolio drift and bring the asset allocation back in line with our strategic model. 

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Why did you choose to partner with the IFDL and Zurich platforms? 

Mainly because they can work with us in being able to house our funds and maintain easy, efficient methods of running model portfolios; they can cope with the advisory and discretionary options. It’s also about having a choice of tax wrapper and the pricing. We have around £6bn in assets on those platforms and the pricing reflects that. 

How are fund managers selected for the institutional mandates at Omnis? 

We know what asset classes we want to augment and we have a list of managers who we’d like to work with, who are able to operate within the structures we have and who have a track record of above-average performance over the medium term.

Around 75 per cent of the assets are pension assets so nobody thanks us for top quartile performance or bottom quartile performance in the short term. They just want good second quartile performance all the time.  

We are about to launch two new funds, a strategic bond fund from Fidelity’s Ian Spreadbury and a UK equity income fund from Martin Cholwill at Royal London Asset Management. Having a choice of different fund managers helps us to bring down the manager risk and style bias in our portfolios. 

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How are funds selected for the model portfolios? 

We have an investment committee within Openwork that looks at portfolio construction and asset allocation. 

The job of the investment committee is to have oversight of the asset allocations. It selects and maintains our recommended fund list of retail funds. We bring that in through Morningstar, which has a mountain of experience in researching retail funds. We have given Morningstar a mandate: we’re only interested in funds that are rated gold or silver. If funds are rated neutral or sell, we will take them off the recommended fund list.   

If advisers want to use funds outside the range of Omnis funds they can use the recommended fund list. However, that has become a smaller part of the business as most advisers don’t want to select funds themselves. 

How is the managed portfolio service run? 

Toni Meadows and his team have some latitude in that they can make investment decisions for the managed portfolio service on a daily basis within set parameters, but if they want to go outside those parameters he will need to come to the investment committee for approval. That is the only way you can make it work. The managed portfolio service has just passed its six-month anniversary and Toni has rebalanced or changed the asset allocation four times, so it is quite an active service. 

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What are the benefits of having your own institutional funds and discretionary permissions? 

Through the institutional funds we are trying to get the price down but some of it is about having greater control. Because we are blending funds together in our portfolios, we want consistency in fund mandates. For example, we don’t want a UK equity fund that contains other things in there; we want control over what the manager is buying and selling.  

We launched Omnis Investments in 2013 because we wanted to be in control of fund manager selection and governance ourselves. The addition of the discretionary service has come later as a result of gaining scale and as market conditions change we want to have the discretionary power of dynamic asset allocation. 

Openwork fact file

Date company established: June 2005, with roots going back to 1971 

Assets under management: £6bn 

Number of staff: 440 

Number of clients: Just over 50,000 platform clients  

Platforms used: IFDL (Openwork Wrap), Zurich Intermediary Platform 

DFMs used: Omnis Managed Portfolio Service (in-house) for discretionary model portfolios, Quilter Cheviot and Seven Investment Management for individual (bespoke) discretionary portfolios 

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