The company runs its funds of funds against a composite benchmark rather than the peer group as it believes this will lead to outperformance of the sector average on a five-year view.
Premier says it is more concerned with controlling risk than its sector position. It singles out cautious managed as an example of a sector that contains funds with different risk profiles although they all meet the Investment Management Association’s requirements.
Premier caps each holding in its Fofs at 5 per cent of the portfolio, which it says limits stock-specific risk and takes the emotion out of the selling discipline. It says some multi-managers allow funds to run up to 10 per cent of the portfolio but this may alter the risk profile.
It says advisers must look inside Fofs and know what they are getting but some people still buy funds on the basis of sector rankings.
Investment director, pooled funds, David Hambidge says: “You could well argue a case for banning league tables. That would mean less chance of buying yesterday’s winners or, more accurately, tomorrow’s losers.”