Swip says the balanced managed sector is dominated by similar looking funds with a lot of equity exposure that have not generated the level of return that advisers are looking for. Swip says its new fund will be different to other funds in the sector that invest in equities, bonds and property, as it will feature a wider set of asset classes to reduce volatility.
The new fund aims for growth above cash, with a target of 6 per cent above the three-month Libor, by investing in funds which provide global exposure to a range of asset classes such as commodities, commercial property, absolute return strategies and private equity. This asset mix takes advantage of the often low correlation between each asset class. Asset allocation is based on a long-term view of historic returns, volatility and correlation of asset classes.
Selection of the underlying funds is an important part of Swip’s process. It is based on qualitative and quantitative research to find the most consistent performers across varying market conditions.
The new fund is jointly managed by Swip’s head of multi-manager Mark Harries and Simon Wood, who have a track record in managing multi-asset fund of fund portfolios with the Swip multi-manager select boutiques fund and the Swip multi-manager diversity fund. Harries and Wood both joined Swip in November 2007 from Cazenove, where they each spent six years.
Swip concedes that Libor plus 6 per cent is an ambitious target, but expects the broad range of assets to help achieve this. Meeting the target will also provide the managers with a performance fee, which should be an extra incentive to drive the performance of the fund.
Some advisers may not like a performance fee on a fund of funds, where keeping costs down is always an issue. Others may feel that access to Harries and Woods in a more aggressive fund than the existing diversity fund is worth a performance fee.