Investment in Physical Property has been a cornerstone for multi-asset solutions. However, investing in Physical Property through investments funds, which provide daily liquidity can cause liquidity mismatches.

While the impact of this liquidity mismatch is not observable under normal market conditions, periodically, when these inherently illiquid investments are subject to large amounts of redemption, the impact manifests itself in valuations as well as the ability to monetise the value in the holdings. Thus, when a financial planner advises a client to set aside money to spend in the future, the client is clearly expecting that when the time comes, they will be able to spend it. No financial planner needs to be told the client reaction to, ‘I am sorry, but you cannot have your money’.

With this in mind, we looked to reduce the liquidity impact of Physical Property in our investment portfolios.

We recognize that Physical Property provides diversification to a multi-asset portfolio, but we feel that the diversification provided is due to the inherent nature of the investment, primarily the lack of valid mark-to-market valuations, which characterize a freely traded instrument like a stock or bond, wherein the risk arising out of liquidity are built, into the price.

As we recognize that yields from Property investments (as well as infrastructure and other long-term investments) can be quite high, we felt to reduce the impact of liquidity in the solutions through a daily priced mechanism would be more suitable in the long run. With this in mind, we feel that access to the high longevity assets through Investment Trusts would be more suitable.

The use of REITS in multi-asset solutions allow us to access the cash flows of illiquid assets without subjecting the portfolio to any of the liquidity risk of the underlying assets. It has been a much favoured way of investing in Property across the globe.

In our experience, more and more asset managers, who provide multi-asset solutions and do not have access to in-house property funds, are resorting to the use of REITs as a means to access Property investments. However, REITS tend to be much more correlated with equities rather than the underlying Property holdings. This is because these investments are quoted on an exchange and allow an investor to easily rotate out of this asset allocation as and when he or she chooses. During periods of market instability, REITs tend to exhibit volatility characteristics and correlations akin to equities. However, we feel that it is a small price to pay for the liquidity and ease of investment operability that it brings.

At Dynamic Planner, when considering the asset allocation changes, we felt that using a mix of REITs and Physical Property was an appropriate way to invest in the Property asset class. To cater for the increased volatility and correlation that the mix provided, we decided to cut down our holdings in the Property bucket from 8% to 5%. This, we felt, was the best way to balance the reduced risk from liquidity against the increased risk of correlation in the portfolio.

Find out more about Dynamic Planner’s asset allocation and Asset and Risk Modelling.

Schroders has partnered with Dynamic Planner, the market-leading provider of digital risk profiling and financial planning services for financial advisers, to launch five risk-targeted funds.

The Schroder Dynamic Planner Portfolios have been designed to enable advisers who use Dynamic Planner to risk profile their clients to select investment solutions that are suitable for their clients’ requirements. The funds target Dynamic Planner risk profiles from level 3 to level 7, and have been specifically designed to remain within the volatility parameters of each level. The five funds are called:

The Schroder Dynamic Planner Portfolios are managed by Schroders’ highly experienced Multi-Manager Team, led by Marcus Brookes. The team research an investment universe of more than 5,000 funds, aiming to select the best combination of products from leading fund managers across equity, bond and alternative asset classes on a global basis. The team will make tactical asset allocation decisions while operating within the Dynamic Planner risk profile, meaning clients’ money will always be aligned to their risk profile.

The portfolios will have an ongoing charge of 0.99% and will be available on a wide range of UK adviser platforms.


James Rainbow, Co-Head of UK Intermediary said:

“The Schroder Dynamic Planner Portfolios provide investors access to the expertise of our highly experienced and talented Multi-Manager Team, led by Marcus Brookes, who currently manage between them more than £3bn of assets on behalf of our clients. We have worked closely with Dynamic Planner for many years. They have a successful risk profiling and investment process which is trusted across the industry by more than 7,000 advisers and we look forward to continuing our relationship with them.”


Chris Fleming, Director of Asset & Risk Modelling, Dynamic Planner said:

“We are delighted to be collaborating with Schroders on this new range of active funds. With their proven expertise and our risk targeting and asset allocation model, this partnership will provide greater choice for investors seeking suitable long-term funds.”