Type: Oeic fund of funds
Aim: Growth by investing in a portfolio of alternative investment funds
Minimum investment: Lump sum £1,000, monthly £50
Investment split: 10% water, 10% timber, 10% commodities, 10% infrastructure, 10% precious metals, 10% fund of hedge fund replacement strategy, 10% equity market neutral 10% currency, 10% volatility 10% global macro
Charges: Initial 5%, annual 1.5%
Commission: Initial 3.5%, renewal 0.5%
Tel: 02380 916747
Skandia’s alternative investments fund is a fund of funds that invests in an equally weighted portfolio of 10 alternative asset classes.
Hargreaves Lansdown senior analyst Meera Patel points out that the fund offers investors access to a range of alternative investments other than the traditional asset classes like equities, property and bonds.
“These alternative assets include the more esoteric types like water, timber, volatility, to the more well known assets like precious metals and commodities. There are 10 different assets in the portfolio and each will have a 10 per cent weighting, which is rebalanced on a regular basis,” she says.
Patel observes that the fund offers diversification benefits with relatively low correlation to traditional assets. “A diversification of different assets can also help lower volatility especially when they move differently from one another and compared to traditional assets.
“Furthermore, the alternative assets are managed by specialists such as BlackRock who is responsible for the precious metals portion, and JPM for the hedge fund element. These are examples of teams that have excellent track records in what they do,” she says.
Skandia intends to achieve absolute returns over a 12 month period through a combination of these assets. “In the current environment, few traditional assets have delivered positive returns over the last year and this is something which could appeal to many investors,” says Patel.
The fund is available directly through Skandia’s own product wrappers or it can be accessed via platforms. Patel thinks this makes it easy for IFAs to access it for clients.
Turning to the potential drawbacks of the fund Patel says: “This is another take on Skandia’s best ideas’ concept involving 10 managers and 10 best ideas. Why Skandia has chosen this particular mix of assets begs questioning, as it is not clear from the literature. I appreciate a diversified mix of assets can have potential benefits, but why this particular selection is something I am not clear about,” she says.
Patel also wonders why Skandia has continued the theme of the number 10, by restricting the fund to 10 assets with a have a 10 per cent weighting in each. “Generally speaking we have been supporters of Skandia’s UK and global best ideas funds, but I don’t quite see the thought process behind the specific assets and their limits in this fund,” she says.
Discussing the charges Patel says: “Skandia’s best ideas funds seem to have a similar charging structure with an estimated total expense ratio of around 2.5 per cent.
“If the returns can be comfortably achieved then I believe the higher charges can sometimes be justified for the superior returns. However, in times when the objectives are not met, will Skandia be prepared to cut the higher fees?”
She does not want to single Skandia out in this respect, as several fund management groups charge higher fees, but says if Skandia did cut fees as a result of poor performance, it would be welcomed.
Summing up Patel says: “This product gives investors exposure to something novel and innovative, but it is an unproven concept and we will have to see how successful it will be with this mix of assets. I’ll be interested in keeping an eye on its performance.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average