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Risk-based funds set to rise, says F&C

F&C says risk-based funds are on the up as a result of developments in the regulatory and distribution landscapes.

A year after the launch of their lifestyle fund range, head of UK retail distribution John Yule says he expects to see significant momentum in the growth of risk-based funds in the UK market.

He says in the US, lifestyle and lifecycle funds were accounting for around two thirds of the rapid increase in assets in funds of funds products over the last 10 years.

He says generally speaking, lifestyle funds are multi-asset portfolios designed to maintain a predetermined risk level to suit different categories of investor while lifecycle, or target date funds reallocate risk and assets over time as they work to a predetermined maturity date.

F&C opted for the lifestyle concept, saying it gains more traction, ensuring the intermediary retains responsibility for reviewing risk-profile of the client as their circumstances change over time.

Yule says: “Traditional multi-manager funds have seen strong take-up with advisers in recent years but if the US experience is anything to go by, we feel that ‘lifestyle’ funds represent the next generation of retail multi-manager products.

Referring to recent concerns raised by the FSA on potential similarities between distributor-influenced funds and broker funds, Yule says risk-based funds remove any chance of being tarred with the same brush.

He says: “Risk-based funds enable advisers to address a number of the concerns of regulators in a very practical way that helps deliver a robust investment proposition to their clients. In particular this includes the FSA’s TCF initiative which was recently identified as the top regulatory risk and priority for the coming year, ahead of financial crime and data security.”

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