This fund aims to provide a return of 3.25 per cent above cash each year by investing in equities, bonds and alternatives such as property, commodities and private equity.
Swip says it could have launched a similar proposition a couple of years ago, but felt it would be better received by the retail market when it had build a three-year track record. It says the performance of its existing funds provide evidence of its management skills across assets classes, which will now be available within a single fund to provide a core for investment portfolios.
According to Swip, there is a demand for this type of fund because investors are looking for alternatives to with-profits and cautious managed funds. In Swip’s view, each asset class has a job to do in achieving an attractive return above cash with relatively low risk.
While equities offer the potential for high returns in the long term, bonds offer an ongoing security of income and protection in times of financial distress. Commodities perform well at a different time in the economic cycle than equities or bonds. Property can provide the diversification that reduces risk, and offers long-term returns. Finally, absolute return funds, including fund of hedge funds, can generate positive returns regardless of market conditions.
Swip stresses that the fund isn’t designed to make timing decisions on switching between asset classes. Instead, each asset class will be managed within a set range to ensure each asset class is adequately represented at all times, while still having the flexibility to take advantage of areas which are doing particularly well.
The fund will be jointly managed by head of balanced funds Jeff King and head of global strategy Ken Adam. Although they can invest in other Swip funds and in funds from other management groups where Swip’s skills are not so strong, they will not be taking a multi-manager approach.
This fund will not rely as heavily on equities to provide returns in the long term as some multi-asset portfolios. While this should keep volatility in check and offer some protection during stockmarket falls, the flip side is that it may not capture as much growth when the stockmarket is performing exceptionally well.