Could you outline your investment management process?
Our members are appointed representatives who run a variety of different business models. Some members have a centralised investment proposition and if they do they need to check it is going to be suitable. Because we’re independent, we start from the whole of the market and cut it down, so it’s less work for our advisers.
We have panel of products and advisers can sell products on the panel. But if they want to sell “off-panel” investments, they need to prove they have looked at the product’s suitability and appropriateness for clients on a one-off basis. No client is disadvantaged by our use of panels.
In addition to that we have 10 model portfolio funds, Sinfonia – our risk-rated range managed by BNP Paribas Investment Partners and a discretionary managed panel.
How are funds selected for your panel and the model portfolios?
We maintain our panel of funds in-house. Because we are independent advisers we also support a research proposition. We look at all the funds in the market and research them in-house.
Our initial quantitative screening looks at things like performance, risk analysis, volatility and Sharpe ratios. We also use qualitative assessment, which looks at factors like the quality of the fund, the manager, the consistency of the investment performance, how the fund could perform in the future and how robust the process is. We engage with the fund mangers and meet them regularly.
Morningstar does the research for the model portfolios and we communicate with the adviser who has purchased them. They are risk-rated and need to be rebalanced every quarter, which can be time consuming.
Why do some funds not make it on to your panel?
We have rules on things like fund size – we don’t want to put tiny finds on there. We also require the fund manager to have a least six months’ experience running the fund. It is unlikely funds would make it onto the panel with a shorter time. If a fund is offshore and mirrors an onshore fund so that there are different versions, we will review each one.
There has been a lot of demand for Neil Woodford’s funds but it took us a long time to get them on the panel as we needed to understand more about the company itself, such as who at the company would challenge Neil in his investment decisions.
Do you provide your members with access to discretionary management?
We have a discretionary manager panel and carry out a high level of due diligence. We use robust due diligence questionnaires to understand the structure of the companies, how assets have grown, what their benchmarks are and how they are assessed. We review everything on the panel annually and are in regular contact with the companies.
We do get pressure from DFMs and advisers to allow DFMs onto our panel but we don’t bow to that pressure. Advisers can select off-panel but would have to do their own due diligence. For DFMs, they don’t have to do whole of market research.
For clients who maybe don’t have a big enough investment to go into a DFM we have our Sinfonia range. It is used as a simple proposition, it is risk targeted and does not require rebalancing.
Is there any choice in relation to platforms?
We have our own platform to enable us to offer things like the Tenet model portfolios. The platform service includes auto-rebalancing at a competitive price. We also have a panel of platforms that are reviewed in-house. They are selected on an annual basis using due diligence questionnaires.
We have a broad panel of platforms as we are trying to meet different client needs. We have just been party to the FCA review – as we had done a platform study we were able to send the FCA a lot of data.
In what circumstances would you remove a fund, a DFM or platform from your panels?
The fund manager market is an area for us to monitor on a day-to-day basis. When a manager leaves we look at the team and structure behind them, the impact of their departure and we will then make the decision whether to remove them. Other than that, we look at reasons they might be underperforming and understand how the fund has behaved at different parts of the economic cycle.
For DFMs, if they are underperforming, we ask why. Something else to bear in mind is the service levels on the bespoke or managed side. For platforms, the only thing is merger and acquisition behaviour; whether assets are dropping and concerns about stability. We need to keep an eye on those things.
Tenet Group Factfile
Date company established: 1992
Assets under management: Not applicable as members hold the assets under advice
No of staff: 273
No of clients: Not applicable as clients sit under the member firms
No of platforms used: 13