The multi-asset portfolios are available to advisers through the Novia platform. Each portfolio will blend funds investing in traditional assets such as bonds and equities with exchange traded funds and absolute return funds. The portfolios can also have direct holdings in assets.
London & Capital says it has used this investment strategy, which aims to preserve capital, for 18 years in its model portfolio. It thinks the managed portfolios will be useful to advisers who are looking outsource the management of client portfolios in a cost-effective way in preparation for the implementation of the Retail Distribution Review.
The portfolios are named 1 to 10 to reflect the risk categories that fit with the Novia platform. If advisers use their own risk profile models, London & Capital suggests using Novia’s comparison tool to ensure the portfolio matches the client’s risk profile.
Portfolio 1 invests mainly in cash funds and bond funds with no pure equity exposure. At the other end of the spectrum, portfolio 10 invests mainly in equities, with no exposure to cash funds and bond funds.
The firm will use exchange -traded funds selectively, not only because they are regarded as cheap. Specifically, ETFs will be used when London & Capital believes active managers will be unable to outperform the market, or where it is difficult to gain exposure to that market through an active manager.
When constructing the portfolios, a key factor in the investment team’s asset allocation is the top-down macro-economic outlook, which includes the team’s expectations for markets such as equities, bonds and currencies. This provides a framework in which to select funds or direct holdings within each asset class or market. Portfolios are rebalanced quarterly to ensure that the asset allocation stays in line with the original risk profile.
Discretionary fund management is becoming popular among advisers as an alternative to multi-manager funds. London & Capital’s portfolios increase choice in this area but their availability only through the Novia platform could prevent some advisers from using them.