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RDR choice from London & Capital

London & Capital Asset Management – Managed Portfolios

Type: Portfolio management service comprising 10 risk-graded multi-asset portfolios available through the Novia platform

Aim: Income and/or growth by investing in a range of asset classes

Minimum investment: Subject to negotiation

Investment split: Managed portfolio 1 – 54% cash funds, 41% bond funds, 2% absolute return funds, 1% commodities, 2% cash; managed portfolio 2  – 45% cash funds, 39% bond funds, 8% equities, 5% absolute return funds, 1% commodities, 2% cash; managed portfolio 3 – 37% bond funds, 29% cash funds, 21% equities, 9% absolute return funds, 2% commodities, 2%cash; managed portfolio 4 – 37% bond funds, 31% equities, 14% absolute return funds, 13% cash funds, 3% commodities, 2% cash; managed portfolio 5 – 46% equities, 27% bond funds, 17% absolute return funds, 4% cash funds, 4% commodities, 2% cash; managed portfolio 6 – 51% equities, 21% bond funds, 18% absolute return funds, 5% commodities, 3% cash funds, 2% cash; managed portfolio 7 – 59% equities, 20% absolute return funds, 12% bond funds, 6% commodities, 1% cash funds, 2% cash; managed portfolio 8 – 63% equities, 20% absolute return funds, 12% bond funds, 6% commodities, 2% cash; managed portfolio 9 – 67% equities, 21% absolute return funds, 7% commodities, 3% bond funds, 2% cash; managed portfolio 10 – 70% equities, 21% absolute return funds, 7% commodities, 2% cash

Charges: Platform charge negotiable between adviser and platform, annual 0.25%

Commission: Negotiable between the adviser and client

Tel: 020 7396 3200

Independent wealth manager London & Capital has 10-risk graded managed portfolios available to advisers through the Novia platform. The aim is to cater for the full range of client risk profiles, with no minimum investment requirements enabling the service to be used for those with smaller and bigger amounts.

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 and the firm believes they will be useful for advisers in preparation for the retail distribution review.

Discussing the useful features of the product IPM director Luke Gibbon says: “London & Capital offers 10 risk-graded portfolios that aim to spread risk by investing in various asset classes.  The lowest risk portfolio invests in cash and bonds but may have a small amount of equity exposure. The highest risk portfolio is predominantly in equities but will also include absolute return funds and commodities.  The funds are actively managed and also rebalanced quarterly.”

Gibbon observes that the minimum investment in to these portfolios is stated as £1,000 or £1,200, but in practice there is no minimum, which makes them accessible for every client.  “At the present time the portfolios are only available via the Novia platform but I believe there are plans to extend onto other platforms,” says Gibbon.

He says that under the Retail Distribution Review, it appears that closer scrutiny will be paid to how IFAs construct portfolios and monitor them on an ongoing basis.  “As a result, funds such as these are being developed so that in theory, the ongoing responsibility is effectively removed from the IFA. Having said this, the IFA may still have to justify the choice of manager and therefore care will need to be taken,” says Gibbon.

Discussing the charges, Gibbon points out that London & Capital make a charge of 0.25 per cent a year. “However, in addition, there will be underlying fund charges, platform charges and Isa charges, so ironically for funds that are geared up for the RDR, it has been difficult to assess the actual charges being applied. I have been sent details of the total expense ratios, which range from 0.49 per cent to 0.76 per cent.  These figures look low even if adviser commission, or should I say fees, are added. I suspect part of the reason is that exchange traded funds are often used for equity exposure.”

Gibbon is not a fan of ETFs. “Virtually by definition their performance is likely to be mediocre,” he says.

Gibbon notes that the product literature talks about past performance based on a model portfolio that has been made up from three global funds in equal proportions.  “Obviously this shows attractive returns but I would not give it much weight without a great deal of further research,” he says.

“If we ignored the RDR, I would not use these funds as undoubtedly extra charges are levied for the management and platform and there is no specific past performance that would allow me to gauge how good or bad the funds are,” he adds.

However, with RDR approaching and all of the uncertainty it brings, Gibbon believes funds such as London & Capital’s portfolios are likely to play a much bigger role in portfolio planning.  “Obviously these funds will have to compete in the growing market of managed and multi-manager funds,” he says.

BROKER RATINGS

Suitability to market: Good

Investment Strategy: Average

Charges: Average

Overall 5/10

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