What will become of the £12bn MyFolio range after Standard Life’s mega-merger with Aberdeen Asset Management is still a work in progress, the suite’s leader says.
Head of fund of funds management Bambos Hambi says no decision has yet been made on merging the multi-asset ranges from the two fund giants or what shape the 13-strong team behind Hambi’s range of funds will take next year.
Other changes are happening in the popular MyFolio suite, however. MyFolio was launched in October 2010 and has been one of the firm’s fastest-growing fund ranges. It has a suite of 15 growth fund options with 10 income funds and has recently seen its fees fall by more than 30 basis points.
Speaking to Money Marketing, Hambi explains his most important asset allocation moves as he reflects on a more optimistic outlook for markets.
In November last year you said the range was neutral on all asset classes for the first time in its history. What has changed?
We took a lot of risk down before the Brexit vote last year. Then as we got more confident we started to be overweight growth assets from October this year. We are now overweight overseas equities in the US, Europe, Japan and emerging markets. We have a small bias towards European equities and Japan because central banks continue with their quantitative easing policies.
We continue to be underweight UK equities because of Brexit risks and political uncertainties so we are better off somewhere else.
In its current shape, there are now 21 asset classes covered in the range and the only two we excluded are UK government bonds and UK short duration government bonds because we think there is very limited value there in the next 10 years.
You recently added global credit and real estate investment trusts to the MyFolio range. Why?
This was included in a 10-year strategic view we conducted, and it is the biggest move we have done in recent months.
This is the key driver of our risk profiling set to maximise returns for investors. We have introduced global corporate bonds and short-dated global corporate bonds, both hedged back to sterling so there is no risk for clients.
The UK corporate bond market is £374bn in size but moving to global we are moving to a £6.9trn market, so a much bigger market with much better liquidity.
In terms of number of issuers, we moved from over 300 to over 2,000 issuers and that creates a lot of scope for fund managers to add performance.
At the same time we go from a duration of 6 years to 6.7 years and so by lowering duration we lowered the risk in the portfolios.
The final tick in the box is that we moved from a yield to maturity of 2.4 to 2.5, so this is an improvement for our clients.
In the growth asset class we have added investments into REITs. We had them on a tactical basis but now we have added them into the strategic asset allocation as well. These funds have a long term horizon and have a much better liquidity and as we grow we need to make sure we have that.
We took a view on overseas property after Brexit in particular. Before the Brexit vote we were invested in the open-ended SLI fund, and those at Henderson Global Investors (now Janus Henderson) and M&G but now we have decreased the position in these funds by up to 2 per cent since the past summer.
How do you make sure you pass on economies of scale to clients as the range grows in size?
The fund has grown from £10bn in November 2016 to £12bn now. In October we reduced the annual management and platform charges on the funds by more than 30 basis points following a review.
We cut fees on the range by 0.15 per cent and 0.325 per cent depending on the share classes existing and new investors select.
You have opened the range to European investors now. Is this move Brexit-related?
The move has nothing to do with Brexit. In 2010 following the demand for cost-effective solutions by advisers we decided to launch MyFolio with the idea that Europe would have followed the UK as a market. This is a global range of funds so this is what we aim for.
The range is now available in Germany as a Luxembourg–domiciled Sicav.
Have there been changes in the team post-merger with Aberdeen Asset Management and what will happen to its multi-asset range?
We have 13 people in the team, excluding Aberdeen’s manager, but we are working on what the team will look like and their multi-asset funds as we speak.