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Passively active approach from 7IM

Seven Investment Management

7IM Asset Allocated Passive Balanced

Type: Oeic fund of funds

Aim: Growth by investing in exchange traded funds and other passive investments

Minimum investment: Lump sum £1,000

Investment split: 40% equity, 40% bonds, 16% alternatives, 4% cash

Isa link: Yes

Charges: Initial 4%, annual 1%

Commission: Initial 3%, renewal up to 0.5%

Tel: 020 7337 0527

7IM asset allocated passive balanced is part of a range of risk-graded funds using passive investments.

Michael Philips proprietor Michael Both points out that the company says the funds maintain many of the benefits of multi-manager products, but lower the cost and increase the precision of the asset allocation instead of using active funds, which tend to have relatively high costs.

“Although carefully not spelled out, 7IM’s underlying rationale is that it believes asset allocation is more important than fund selection. Or rather it believes it is more able to add value by being in the right sectors than picking active managers to manage the sectors it selects, which isn’t quite the same thing,” says Both.

He observes that 7IM’s own experience might have formed that particular opinion. “The logical extension is to use ETFs – why pay an extra 1 per cent a year for fund management if you are not convinced any manager can consistently beat their sector’s benchmark by more than that?”

Considering the potential drawbacks of this fund Both says: “The performance benchmark is 50 per cent FTA All Gilts and 50 per cent FTSE Allshare yet the literature seems to suggest perhaps 25 per cent will be in alternatives without being all that clear what role they will have.

“It is also a moot point whether an investor might consider that a balanced fund should include property. No indication is given whether the fund might take a defensive position in cash if analysts believe the UK equity market may fall and interest rates rise, rather like recent market conditions.”

In Both’s view, the main competitor will be Cazenove multi-manager diversity which is an active alternative with a good track record. “Anoraks may be like to know the first actively managed ETF fund was launched in the US by Bear Stearns. It is likely that 7IM will not be alone in the UK for long,” he adds.

Summing up Both says: “It will be interesting to see how much of its own business 7IM cannibalises with the launch of a range of low-cost passive funds that will compete with its own active funds.”

He is not entirely convinced it is fair to compare these to multi-manger funds, but he thinks it is hard to argue against the logic of using ETFs to gain index matching exposure if that is all clients want.

“It is well worth advisers checking that particular point and confirming it in their suitability letters. Active-fund multi-managers will have few credible excuses if they do not beat 7IM’s managers using ETFs. A few sleepless nights ahead, I think, especially for 7IM’s active multi-manager team.”


Suitability to market: Good
Investment strategy: Good
Charges: Good
Commission: Good

Overall 8/10


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