The fund will invest globally but will have a bias towards the UK to enhance its appeal for domestic investors. Skandia says the fund was designed to reflect how the managers might run their own money.
Managers will be selected on their ability, philosophy, investment process and track records. They will be free to select their best ideas without the constraint of benchmark weightings and can take big positions in stocks. The fund will also have the flexibility to hold up to 25 per cent in cash.
The initial asset allocation will be based on world economic growth but the weightings may shift each year to allocate more money to countries going faster than any others
At launch 50 per cent will be invested in the UK, while the rest is distributed across the Us, Europe emerging markets, Japan and Asia Pacific
The UK part of the fund will be run by five managers – Richard Plackett of Merrill Lynch, Mark Tyndall of Artemis,. Roger Whiteoak of Framlington, Stephen Whittaker of New Star and Ashley Willing of Gartmore. In addition, Martin Currie’s Tom Walker with run the US element, Odey Asset management’s Crispin Odey will manage Europe ex UK, First State’s Angus Tolluch takes care of emerging markets,, Schroders’ Nathan Gibbs focuses on Japan and Aberdeen’s Hugh Young will run Asia Pacific ex Japan.
Some of the managers will have a short-term outlook, trading the portfolio heavily to exploit short-term trends. Others will buy and hold for the longer term, looking for companies they regard as undervalued.
Although the underlying managers were chosen for the long-term, Skandia will constantly monitor them and could replace them if deemed necessary.
The company believes it would be difficult for its competitors to create a similar fund because a fund of funds approach would not work. For a manager of managers approach to work, good relationships with the underlying managers are necessary
Selecting top managers for their best ideas could provide good opportunities to returns and ensures diversity at geographic and manager level. It marries the benefits of a concentrated portfolio with the benefits of multi-manager. However, there may be some overlap for UK stocks as there are five different managers. But Skandia does not see this as a problem in a 100 stock portfolio and argues if this happens the stock is likely to be a very strong stock.