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Dynamic Planner, the UK’s leading risk based financial planning system, is now risk rating L&G’s Future World Global Opportunities Fund.

Managed by Colin Reedie, the award-winning L&G Future World Global Opportunities Fund is ranked No1 in its sector – IA Mixed Investment 20-60% Shares for its five-year performance. The fund follows a robust risk budgeting approach in portfolio construction and adopts an inherent conservative risk management culture. The fund invests in a wide range of assets, including equites and bonds, which meet Legal & General Investment Management long term sustainable investment criteria, based on environmental, social and governance factors.

On the independent and propriety 19 year Dynamic Planner Asset Risk Model the L&G Future World Global Opportunities Fund is a Risk Profile 5.

Yasmina Siadatan, Chief Revenue Officer, Dynamic Planner said: “L&G Future World Opportunities Fund is award-winning, with an interesting investment remit which incorporates L&G’s Climate Impact Pledge. Currently topping its sector for five year performance, we are pleased to be working closely with L&G to help match the fund to suitable investors through Dynamic Planner.

“There are now over 40 L&G solutions risk profiled with Dynamic Planner, meaning we take data direct from L&G to accurately risk assess the underlying holdings, institutional level research which is then available within the software to all our clients and their end investors through reports. We are delighted to welcome another L&G fund and further broaden out the choice of investment solutions and funds for our clients.”

Colin Reedie, Fund Manager and Head of Active Strategies, Legal & General Investment Management said: “We are living through remarkable times, both geopolitically and in financial markets. This creates prime investment opportunities that we have designed the L&G Global Ops fund to target. Our success is born out of a distinctive structure and process, underpinned by shrewd individual contributions to the team effort.”

Read to find more information about the fund on: https://fundcentres.lgim.com/en/uk/private-investors/fund-centre/Unit-Trust/Future-World-Sustainable-Opportunities-Fund/

Dynamic Planner, the UK’s leading risk based financial planning system, has added Omba’s Managed Portfolio Service (MPS) to its growing range of over 900 model portfolio solutions.

Omba MPS is aimed at advisers and designed to provide transparent, cost-effective and tax-efficient access to global and multi-asset managed portfolios. It consists of three ranges of investment options: Core, ESG and UK, with a total of eight portfolios all now risk profiled on Dynamic Planner.

The Omba MPS portfolios added to Dynamic Planner are:

Yasmina Siadatan, Chief Revenue Officer, Dynamic Planner said: “Model portfolios have seen significant growth in recent times driven by technology adoption and the increasing regulatory burden on advisers, whether MiFID2 or Consumer Duty.

“As a result we are working with an ever increasing number of MPS providers to ensure we deliver the full choice to our clients and theirs, with MPS solutions risk profiled on Dynamic Planner now totalling over 900. We welcome Omba’s Managed Portfolio Service in bringing advice firms even more choice when it comes to risk profiled MPS on Dynamic Planner.”

Co-Founder Mark Perchtold, Omba said: “We are excited to announce Dynamic Planner has risk profiled our Managed Portfolio Service (MPS). Since our inception in 2017, we have specialised in ETFs and our independence is what sets us apart.

“We believe having our MPS risk profiled on Dynamic Planner will provide enhanced choice to the UK adviser market as they strive to meet the dynamic and evolving needs of their client base.”

To find out more about Omba’s Model Portfolio Services, visit their website here

By BNY Investment Management

The BNY Mellon Multi-Asset Income Fund is moving from risk bucket 6 to 5. In this blog we consider the rationale for this re-classification.

As of 17 May 2024, the BNY Mellon Multi-Asset Income Fund (MAIF) has been reclassified as Dynamic Planner Risk Rating 5. This reflects the fund’s robust risk management framework, at the forefront of which is the multi-asset team, who actively manage risk and return on a daily basis and who participate in the processes of idea generation, sharing, evaluation and implementation in portfolios.

As a reminder, MAIF has been a Dynamic Planner Premium Rated Fund1 for several years2 and will carry this across to the new risk bucket.

Launching in February 2015, the Fund aims to achieve income together with the potential for capital growth over the long-term (5 years or more). The Fund invests in a diversified range of assets, from equities and bonds to alternative assets.

Income is targeted at portfolio level, allowing the manager to determine where best to achieve income and where to seek capital growth. Globally focused, proprietary research that incorporates environmental, social and governance (ESG)3 considerations is a hallmark of Newton’s investment process.

If you would like more information, please visit the fund centre here or email BNY Mellon Investment Management at salessupport@bnymellon.com.

  1. Dynamic Planner Risk Ratings should not be used for making an investment decision and it does not constitute a recommendation or advice in the selection of a specific investment or class of investments
  2. As at September 2023.
  3. Investment decisions are not solely based on environmental, social and governance (ESG) factors and other attributes of an investment may outweigh ESG considerations when making decisions. The way that material ESG factors are assessed may vary depending on the asset class and strategy involved and ESG factors may not be considered for all investments.

Performance track record

YTD 2023 2022 2021 2020 2019
BNY Mellon Multi-Asset Income Fund 3.36% 4.09% 0.34% 9.32% 35.15% -12.1%
Benchmark 3.02% 13.2% -3.31% 5.51% 22.75% -1.65%


Source for all performance: Lipper as at 30 April 2024. Fund Performance for the Institutional Shares W (Accumulation) calculated as total return, including reinvested income net of UK tax and charges, based on net asset value. All figures are in GBP terms. The impact of an initial charge (currently not applied) can be material on the performance of your investment. Further information is available upon request.

Benchmark: The Fund will measure its performance against a composite index, comprising 60% MSCI AC World NR Index and 40% ICE Bank of America Global Broad Market GBP Hedged TR Index, as a comparator benchmark (the “Benchmark”). The Fund will use the Benchmark as an appropriate comparator because the Investment Manager utilises this index when measuring the Fund’s income yield.

The Fund is actively managed, which means the Investment Manager has absolute discretion to invest outside the Benchmark subject to the investment objective and policies disclosed in the Prospectus. While the Fund’s holdings may include constituents of the Benchmark, the selection of investments and their weightings in the portfolio are not influenced by the Benchmark. The investment strategy does not restrict the extent to which the Investment Manager may deviate from the Benchmark.

The fund can invest more than 35% of net assets in different Transferable Securities and Money Market Instruments issued or guaranteed by any EEA State, its local authorities, a third country or public international bodies of which one or more EEA States are members.

Past performance is not a guide to future performance.

The value of investments can fall. Investors may not get back the amount invested. Income from investments may vary and is not guaranteed.

Important information

For Professional Clients only. This is a financial promotion.

For a full list of risks applicable to this fund, please refer to the Prospectus or other offering documents.

Please refer to the prospectus and the KIID before making any investment decisions. Go to www.bnymellon.com
Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.
For further information visit the BNY Mellon Investment Management website: http://www.bnymellonim.com. Doc ID: 1916807. EXP: 16 September 2024.

By Andrzej Pioch, Lead Fund Manager, L&G Multi-Index Funds

A typical broad global equity benchmark has around two-thirds of its stocks domiciled in the US1. Perhaps unsurprisingly, global equity indices therefore share the majority of their top 10 constituents with US equity indices, and the typical overall portfolio overlap between the two is currently over 60%2.

Comparing the S&P 500 index’s top five holdings in 2009 versus today, they share only one name – Microsoft – and the concentration in top holdings has also increased from 10% to over 26% as at 25 January 2024. This has resulted in recent positive US equity index performance being driven by a relatively small number of stocks, namely the ‘Magnificent 7’ of Apple*, Amazon*, Alphabet*, Meta*, Microsoft*, Nvidia* and Tesla*. We believe this poses concentration risk not only for investors who hold US index exposure, but also for multi-asset strategies that hold global equity indices with common underlying exposure.

 

What can we do about it?

Some multi-asset strategies that align their equity exposure with global equity indices may increasingly look like a material bet on mega-cap tech companies becoming even larger. So, what can investors do to manage that risk?

They could always move back to active management for their equity exposure, where the manager might lower exposure to the ‘Magnificent 7’ and offer exposure to other themes that they believe could provide more attractive risk-adjusted return potential. However, this may introduce other types of stock-specific risk given the active nature of the approach and may potentially increase costs.

If they would like to preserve the simplicity and transparency of the index approach, they essentially have three options:

  1. Use regional equity indices to build a more geographically-balanced equity portfolio. This preserves the transparency of the market-cap weighted index approach within individual regions, but lowers reliance on US stocks and in particular US mega-cap tech within the overall portfolio.
  2. Complement their global market-cap exposure with a single- or multi-factor equity index exposure, which will tilt their exposure towards equity factors that have been shown to reward investors with long-term premia such as value, low volatility, quality, size or momentum.
  3. Complement their market-cap exposure with equal-weighted investments leveraging emerging areas shaping our future. When identified and designed carefully, thematic portfolios can potentially act as a diversifier, while providing access to important areas such as clean energy, access to clean water and cyber defence.

In our L&G Multi-Index range, we seek the cost-effectiveness, diversification and transparency an index approach can deliver to individual asset classes, and then we combine this with dynamic asset allocation.

With a wide range of L&G index funds at our fingertips, we don’t need to accept global benchmarks’ implicit biases or concentration risks. That’s why we seek to spread our equity risk across a number of regional equity indices and gain exposure to long-term thematics via well-diversified L&G ETFs.

For example, while we are positive on artificial intelligence (AI), we don’t believe the ‘magnificent seven’ are the only companies set to benefit from this theme. We have spread our allocation equally over approximately 60 companies with distinct portions of their businesses and revenues derived from AI, that have the potential to grow in this space.

While certain index benchmarks have become increasingly concentrated, when introducing new risks to index investors we need to be careful not to throw the index baby out with the bathwater.

We think the innovation and ingenuity we have seen in this space makes index investing an exciting area to explore, not just for growth investors but also those looking for potential higher income, or who want to go further when it comes to ESG investing. That’s why they are a core foundation of our entire Multi-Index fund range.

Sources:

1 The MSCI World, for instance, has a 69.7% allocation to US stocks. Source: https://www.msci.com/documents/10199/178e6643-6ae6-47b9-82be-e1fc565ededb
2 Nine of the top 10 portfolio holdings are the same in the S&P 500 and the MSCI World, and the overall portfolio overlap is around 66%. Source: Bloomberg data using ETFs as a proxy of index compositions, as of 02 October 2023

Key risk warnings

The value of investments and the income from them can go down as well as up and you may not get back the amount invested.

Past performance is not a guide to future performance. *The details contained here are for information purposes only and do not constitute investment advice or a recommendation or offer to buy or sell any security. The information above is provided on a general basis and does not take into account any individual investor’s circumstances. Any views expressed are those of LGIM as at the date of publication. Not for distribution to any person resident in any jurisdiction where such distribution would be contrary to local law or regulation. Please refer to the fund offering documents which can be found at https://fundcentres.lgim.com/

This financial promotion is issued by Legal & General Investment Management Ltd. Registered in England and Wales No. 02091894. Registered office: One Coleman Street, London EC2R 5AA. Authorised and regulated by the Financial Conduct Authority. Legal & General (Unit Trust Managers) Limited. Registered in England and Wales No. 01009418. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119273

By TIME Investments

Market landscape

Inflation has been one of the key macroeconomic drivers of investment performance over the last 18 months and this will likely persist into 2024, albeit to a lesser extent. We have however started to see a shift, with annual inflation in the UK and other Western major economies now well below its peak. The debate, therefore, has largely moved to when UK CPI will meet the Bank of England’s (BoE) 2% target. The BoE itself forecasts this to occur in calendar Q2 2025 but the performance of the UK economy could influence this timing heavily according to market forecasters. Capital Economics estimates that UK CPI could be below 2% before the end of 2024 with a large element of this a weakening of economic growth, and potentially a recession early this year.

Inflation will be a key factor in any BoE decision making when it comes to the pathway of interest rates. According to a Reuters poll taken on the 9 November, consensus forecasts estimate that the UK base rate will remain at the current 5.25% level until calendar Q3. From here consensus forecasts the base rate to decline over the final two quarters of 2024 to 4.5% and then to 4.0% by Q2 2025. Central Banks, including in the UK and US have been firm in stating that interest rates will be kept at least at their current levels until inflation is clearly on track to meet central banks targets. However, some influential rate-setters in countries including in the UK have added support to potential rate cuts in 2024 with data looking broadly supportive in late 2023 and early 2024.

The impact on Real Assets

Real assets, particularly those that seek to provide long-term income, have been heavily influenced by changes to monetary policy and this will likely continue in 2024. A large proportion of infrastructure and real estate investment valuations are directly or indirectly influenced by government bonds. This has been a negative influence over the past twelve months but could now start to create more favourable conditions. In the past, we have seen that increased confidence in the downward pathway in interest rates has supported lower long-term UK government bond yields and we saw some early evidence of this in the last two months of 2023. Traditionally, this has been a catalyst for the stabilisation of real asset capital values, before leading to a return to growth. The conditions for 2024 will likely be more supportive than much of 2023 for real assets, including listed infrastructure.

Returns when investing in Infrastructure

Whilst both heavily influenced, listed infrastructure is generally more sensitive to bond yields than listed real estate. Most sectors we target acquire assets with long-term cash flow streams, often with income linked to inflation meaning that the securities act as an indexed-fixed income proxy, in an equity wrapper. A number of the securities we have invested in saw their share prices negatively impacted by rising longer-dated UK government bond yields. Reducing bond yields will likely see many sectors see greater stability in their portfolio values in 2024. Income in the meantime has remained very resilient with many sectors seeing persistent income growth, often translating into growing dividends.

Whilst political risk is elevated in a general election year, UK infrastructure looks well supported by the two main Westminster parties. In October 2023, shadow chancellor, Rachel Reeves, stated that a Labour government would, “get Britain building again,” and plans would “accelerate the building of critical infrastructure for energy, transport and technology.” UK public debt remains highly elevated and though infrastructure has been an easy target for spending cuts such as in the early 2010s, there seems to be a greater understanding of the need for continued, well-targeted infrastructure investment, further creating confidence.

For more information on our offering, including the key risks of the fund, please visit our website (time-investments.com)

TIME Investments is a trading name of Alpha Real Property Investment Advisers LLP which is the Investment Manager of the Fund with delegated authority from Alpha Real Capital LLP, the authorised corporate director of the Fund, both of which are authorised and regulated by the Financial Conduct Authority. Please note investors capital is at risk.

By Sarasin & Partners

Just how does an adviser go about identifying the best MPS providers for their specific needs?

Increasingly onerous regulations are prompting many IFAs to partner with discretionary fund managers (DFMs), and utilise platform-based model portfolio services (MPS). That said, choosing the right DFM partner can be daunting. So how does an adviser go about identifying the best MPS providers for their specific needs?

Focus on performance

It may be tempting to choose a DFM who has achieved short-term outperformance, but performance should be measured with care. For example, it is not unusual to find that last year’s worst-performing fund manager achieves top-quartile performance this year.

Periods of three to five years and longer provide a more informed view. It is also important to consider performance over discrete, one-year time periods to ascertain whether five-year performance is due to outperformance over a very short time period, or achieved gradually. Risk-adjusted performance is also important and a key indicator of whether an investment process will provide smooth or stop-start returns.

Sensible costs and value for money

Fees have long been a central consideration when evaluating any investment product or service. But it’s not just these costs that an adviser must consider – platform charges, wrapper costs and the adviser’s own fees must also be accounted for.

Under MiFID II legislation, DFMs must provide a breakdown of the total cost of their investment services, including transaction costs, so advisers can now scrutinise costs and compare DFMs more easily. Costs should also represent fair value. Under Consumer Duty regulations, DFMs are required to provide value for money analysis of their MPS.

Solvency and robustness

When evaluating the financial strength of a DFM, an independent measure of an investment manager’s financial strength such as an AKG rating can provide a useful third-party view. Recent or planned changes of ownership should also be considered.

Attentive service and clear communication

Good two-way communication is fundamental to forming a close business relationship, developing trust and retaining confidence. DFMs should be in regular communication with their advisers, keeping them abreast of investment views and how portfolios are positioned. They should also inform advisers of upcoming rebalances and say why the changes are being made.

First impressions count. A client’s first encounter with an MPS service is often via client-facing literature. Well-presented and clearly-written client literature – perhaps with the option of dual-branding – can go a long way to enhancing your client’s experience.

Team and culture

Running a successful MPS over a multi-year period requires an experienced and skilled portfolio management team. But experience and skill may count for nothing if the portfolio managers aren’t well supported by administrators, fund researchers, economists, strategists and a dedicated risk office.

The investment process should not rely on any one individual and investment decisions should be scrutinised by peers. Risk controls should ensure portfolios are managed in accordance with the agreed mandate and risk parameters.

Enhancing your MPS selection

Many advisers split larger client accounts between several DFM partners to achieve additional diversification. Blending DFMs that have different approaches and performance outcomes can help provide a smoother return profile across the economic cycle.

Take time to decide

Partnering with discretionary fund managers is an increasingly attractive proposition for many IFAs. But with a vast array of DFMs and investment strategies to choose from, finding the best fit can take time. Being armed with the relevant selection criteria and a checklist of questions are essential first steps in exploring whether to partner with a DFM.

 

If you would like to discuss any of the issues mentioned in this article, please contact Sarasin and Partners:

T +44 (0)20 7038 7000
E contact@sarasin.co.uk
sarasinandpartners.com

If you are a private investor, you should not act or rely on this document but should contact your professional adviser. The value of your investments and any income derived from them can fall as well as rise and you may not get back the amount originally invested. Past performance is not a guide to future returns and may not be repeated. Sarasin & Partners LLP is a limited liability partnership registered in England and Wales with registered number OC329859 and is authorised and regulated by the Financial Conduct Authority.

© 2023 Sarasin & Partners LLP – all rights reserved.

RSMR has introduced its Passive Plus MPS range to the wider market, using an investment approach that has been successfully applied to individual bespoke portfolios for six years, on both an advisory and discretionary MPS basis.

The Passive Plus portfolios comprise chiefly RSMR-rated passive funds, plus targeted exposure to RSMR-rated active funds, to add diversification and/or dampen down volatility. The range is aimed at advisers and their clients who prefer the simplicity and lower charges of passive funds, but who are concerned about the relative risk of 100% passive exposure, or fear missing out on the opportunities that active funds can access.

The portfolios will be risk profiled by Dynamic Planner on a quarterly basis. Platform availability is via abrdn Elevate, abrdn Wrap, Aviva, Fidelity Adviser Solutions, Nucleus, Quilter and Transact.

Ken Rayner, RSMR CEO, said: “We’re very pleased to introduce our Passive Plus range to the wider market. Since launching RSMR 20 years ago, researching funds for advice businesses has been the bedrock of our business.”

Stewart Smith, Head of Managed Portfolio Services at RSMR, said: “The passive plus strategy has worked really well for advisers and their clients in a variety of markets. For our passive exposure, we select RSMR-rated funds from a range of fund groups such as Fidelity, HSBC, iShares, Legal & General and Vanguard. The exposure to RSMR-rated active funds, sitting alongside the larger exposure to passive funds, is targeted where it can add value.”

www.rsmr.co.uk

By Newton Investment Management

Against a backdrop of volatility and macroeconomic uncertainty, investors might be wary about the future. Here, Newton multi-asset chief investment officer Mitesh Sheth and FutureLegacy portfolio manager Lale Akoner outline what they think makes a robust multi-asset portfolio in the current environment.

We have entered a market regime characterised by deglobalisation, decarbonisation and divergence, which requires an active, dynamic and sustainable approach to portfolio management, according to Newton multi-asset chief investment officer Mitesh Sheth and FutureLegacy portfolio manager Lale Akoner.

“We believe this next decade will be unlike anything we have lived through before,” says Sheth. “We cannot just rely on historical models and data, or experience alone to navigate this volatile regime.”

Sheth thinks volatility in markets has led investors to be nervous about saving for the future.

“People want their investments to keep pace with inflation, they want to remain resilient through this market volatility and leave a legacy, not just for their own kids but for all our futures on this planet,” he adds.

He argues in this environment it is important for investment management to draw heavily on multiple research inputs across asset classes. At Newton these include quantitative, fundamental, and sustainability research and even investigative journalism.

On a thematic level, Newton’s research considers the macro themes of big government, China’s influence, financialisation and the great power competition; and micro themes of the internet of things, smart everything, tectonic shifts, picture of health and natural capital.

Sheth says bringing this all together enables the investment process to be ‘joined up, agile and able to spot opportunities others miss – now and in the future’.

Dynamic and active

Other important factors in the current environment, Sheth adds, include being directly invested and actively managed.

“At a time of great divergence, we believe passive strategies may struggle to deliver positive real returns,” he says.

Akoner concurs that as capital becomes limited, talented active managers have a higher chance of outperforming benchmarks. She notes 2022 was the first year since 2009 that most active asset managers of equity mutual funds were able to outperform the S&P 500 index .

“This is because liquidity is getting scarce and the dispersion between stocks and sectors is increasing, leading to a boarder opportunity set for active managers,” she adds.

Tactical overlay

In terms of portfolio construction, Akoner argues tactical asset allocation, using a derivative overlay, is fundamental to navigating the current market volatility.

“We look at things like liquidity indicators, positioning and flow indicators as well as spreads data to see if there is any froth in the market,” she says. “We can use futures, forwards, and physical securities to navigate the environment tactically.”

In terms of long-term positioning, Akoner says the portfolios are overweight in healthcare and utilities while underweight in consumer discretionary and energy. When it comes to fixed income, portfolios are underweight duration relative to the benchmark.

“We think market is incorrect in pricing quick Fed cuts,” she adds. “We think especially the ample amount of Treasury issuance could contribute to the peak rate environment in the short term. When those rates start to come down, we could go neutral and move long equity futures.”

Sustainability

With decarbonisation also being a key facet of the new market regime, Akoner says it is important for an investment process to support the transition to a low carbon economy. This, she adds, means adopting an investment process that incorporates red lines for excluding certain companies. The FutureLegacy team then look for three buckets of investment opportunities:

  1. Solution providers – companies solving problems on sustainability through products and solutions. For example, heating, ventilation and air conditioning (HVAC) businesses
  2. Balanced stakeholders – companies with sustainable internal processes. For example, companies best in class for governance or high standards on human capital management
  3. Transition – companies at the start of their sustainability journey but showing a credible commitment to a transition business model

Akoner notes sustainable strategies in the wider industry have tended to have a growth bias, because they consist to a large degree of technology companies which can have lower carbon emissions. However, she argues quality is the primary factor the team look for which could then result in a stock being either value or growth.

Please feel free to contact us if you would like more information on the FutureLegacy range.

The value of investments can fall. Investors may not get back the amount invested.

For Professional Clients only. This is a financial promotion.

Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.

For further information visit the BNY Mellon Investment Management website: http://www.bnymellonim.com.

Dynamic Planner, the UK’s leading risk based financial planning system, has analysed the data* of almost 17,500 advised investors views on the importance of sustainability.

As COP 28 gets underway, Dynamic Planner has found that while investing sustainably remains an important factor, as willingness to take risk increases the importance of sustainability reduces. The analysis showed that of those investors in risk profile 10, Dynamic Planner’s highest risk level, 6 out of 10 viewed sustainability as of low importance **

Chart showing the relationship between an investors risk (1-10) and sustainability (low to very high profiles)

Dynamic Planner also found that a larger proportion of men (39%) than women (26%) view sustainability as something of low importance, while (32%) of women view sustainability as of medium to very high importance compared to men (21%).

The stereotype that younger clients have a greater preference for sustainable investments due to supposedly being more values-driven and having a greater desire to seek investments that align with their views were not borne out in the analysis, with no apparent differences across any of the age groups.

In terms of which aspect of sustainability is held in highest regard, more investors said the ‘G’ of ESG is a priority as it means investments help companies treat all stakeholders fairly. Even a proportion of around 70% of investors who consider sustainability to be of low or some importance, agree with this statement, 17% and 51% respectively. Surprisingly fewer placed as much importance on ‘E’ – that investments help to improve the environment. The ‘S’ – that their investments should help improve people’s living conditions was the lowest priority of the three ESG factors. However, of those who view sustainability as of high and very high importance, a higher percentage strongly agreed that it is priority to help improve the environment, compared to improving living conditions and treating stakeholders fairly.


Chart showing importance placed on ESG statements

Louis Williams, Head of Psychology and Behavioural Insights at Dynamic Planner, said: “Our analysis paints a nuanced picture of attitudes towards investing sustainably and ESG factors. Events like COP28 which bring the world together to focus on issues such as climate action have ensured that many people understand the importance of acting in a sustainable way. However, using the power of their investments to shape the world for the better is perhaps limited for some due to the greater focus on trying to achieve a better return.

“We have found those investors who are more comfortable with increased financial risk are prepared to invest in market opportunities that go beyond the realms of companies that act in a sustainable or ESG risk managed way. This may be because climate change and risks of stranded assets have not yet been properly understood or their appetite for not missing out on certain market sector returns is still the overriding motivation. There also may well be some investors who want their fund managers to engage (by remaining invested) to bring about change.”

* Research has been undertaken using data from Dynamic Planner’s sustainability questionnaire, an industry first when it was launched in 2021 and created by the team behind the UK’s leading risk profiling process. A client’s sustainability preference is profiled on a scale, like their attitude to risk, providing you with a foundation for a conversation and enabling you to match it with solutions with ESG ratings available to research in Dynamic Planner.

Dynamic Planner also offers clients access to independent and whole of market ESG research of more than 32,000 funds. Guard against greenwashing and trust that the research is objective and is rigorously completed by a 200-strong team of analysts at MSCI, a world leader in the field which has been doing it longer than anyone else.

** Risk Profile 10 – Likely to contain very-high-risk investments such as emerging market shares and a small amount in high-risk investments such as shares in UK and overseas developed markets.

By Minerva Fund Management Solutions

For a number of years, financial advisory firms have operated in an environment that is ever changing and bringing increased challenges to their business model. One challenge is managing a range of client portfolios across a range of clients and asset classes.

As a financial advisory firm, it is an expectation that the suite of products offered will be broad, flexible and potentially encompass a range of investment options that meets a varied set of client needs, particularly for firms holding themselves out as independent.

PROD has resulted in financial advisory firms offering their clients solutions based on client lifecycles (the ‘target market’), that can contain a variety of investment solutions including active, passive, blended options, bespoke investment management and the ability to meet a client’s ESG preferences.

Needless to say, Consumer Duty is a piece of FCA regulation that brings another challenge, which requires a financial advisory firm to scrutinise their business and formally document how they meet the four client outcomes, taking into consideration a number of requirements such as client needs and the associated costs aligned to a level of service or tariff that represents fair value.

This has led financial advisory firms to explore opportunities to simplify their processes, and one opportunity that is generating more interest is unitising existing client investment solutions within their Centralised Investment Proposition (CIP).

The rationale for this is due to a variety of reasons, so there is no ‘one size fits all’ approach but to give you an example; under the Consumer Duty, good client outcomes for all clients is one of the core principles, if a financial advisory firm is managing a CIP across multiple platforms and each platform trades with a different modus operandi, then investment outcomes will inevitably be varied across their client base. Firms will need to think through the implications of this under their Consumer Duty procedures.

A unitised fund solution can enable a financial advisory firm and its clients to access the same investment solution and have similar investment outcomes. In addition, there are a number of other factors that could lead a financial advisory firm to consider unitisation as an option for their business. It has the potential to provide:

In addition to the above, in our view, a unitised fund solution may help a financial advisory firm satisfy two of the four outcomes under Consumer Duty, namely Products and Services and Price and Value. This is because under the Consumer Duty, products that already comply with the Product Governance Rules in PROD and the Collective Investment Scheme Assessment of Value Rules in COLL, can satisfy these two Consumer Duty Outcomes. As a result, the use of FCA regulated unitised funds could achieve these two outcomes.

So, there are a number of fundamentals as to why a financial advisory firm could consider this option to augment their CIP. However, before a financial advisory firm reaches a conclusion that a unitised offering is a good move for their business, there are other factors that need to be considered before they can press the start button.

As a starting point, a financial advisory firm will need to compare a client’s current proposition with the potential unitised investment offering. Prior to undertaking this comparison, there is perhaps a perception that a fund offering may increase the ongoing charges figure (‘OCF’). However, this is not always the case and before making this assumption, it is always worth having an in-depth discussion with potential providers. Of course, one key factor in an overall OCF is fund size, and in our experience, making a unitised solution as part of a CIP viable requires AuM of at least £50m per fund.

Another aspect to consider is client reporting. A client using a Model Portfolio Service for example, can have the added benefit of a client viewing individual holdings in a quarterly valuation and take comfort their portfolio is diversified; compared to a unitised solution with just one or two fund holdings. Having said that, there are technology solutions that are available and will offer a ‘look through’ service.

In essence, there is no overriding rationale as to why a financial advisory firm should, or should not, offer a unitised investment solution to their clients. The most optimal outcome will, of course depend on their business model, client requirements and what is most suitable for their clients.

Find out more. Contact Mark Catmull, Sales and Marketing Director, Minerva Fund Management Solutions.