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Prior to the implementation of regulation known as the Retail Distribution Review in January 2013 the majority of investors dealt with an adviser – whether it was on a regular basis, or to offer periodical advise at key life events.
But the Financial Services Authority launched the review in 2006 to improve professional standards, increase transparency and compel the industry to offer advice for all. It wanted to stop advisers making investment decisions based on potential commission. By the 2013 implementation this had boiled down to a ban on advisers taking commission.
Some investors were confused by the concept of paying for something they had previously thought of as free – investment advice. There were also stories of investors with smaller portfolios being dumped by their adviser as they were no longer cost effective or could not afford to stump up the new upfront costs.
As a result, an increasing number of investors choose not use a financial adviser on a regular basis, if at all. But that does not mean they wish to make asset allocation decisions themselves. Instead, investors are opting for one-stop-shop funds, multi-asset portfolios – many of which are risk rated to meet an individual’s needs.
“Multi-asset funds are an important sector in the UK and they have seen growing inflows relative to other categories in recent years,” said Morningstar fund analyst Randal Goldsmith. “Their popularity may be due to their suitability for individuals and independent financial advisers, or IFAs, who want to hand over the bulk of investment decisions to an investment manager.”
3 Top Rated One-Stop-Shop Funds
Morningstar Analyst Silver Rated
Henderson Cautious Managed is a strong choice for investors seeking a plain-vanilla U.K. equities and bonds mandate, says Goldsmith. Chris Burvill was the sole named manager of this fund from launch in February 2003 until July 2012 when he was joined by named comanagers John Pattullo and Jenna Barnard. Burvill has remained responsible for the overall structure and asset allocation, including the final positioning of the fixed-income portfolio. However, he makes significant use of Pattullo and Barnard for fixed-income ideas, and they can deal on this segment of the fund, typically putting on individual credit names directly.
Pattullo, director of fixed-income, and Barnard are experienced fixed-income managers, having joined Henderson in 1997 and 2002, respectively. The equity portion is managed using a contrarian, value-based approach, including stocks across the market-cap range, albeit with a large-cap bias, and informed by top-down views on the economy.
Morningstar Analyst Silver Rated
Newton Real Return is a strong choice for investors seeking a target-return multi-asset fund with an emphasis on capital protection, says Goldsmith. Iain Stewart is among the most experienced multi-asset target-return managers in the United Kingdom, and he has run the fund since inception in April 2004. Before that, he managed traditional balanced and global-equity mandates based on Newton's theme-driven process and has around 30 years' experience in this style of investing.
The fund targets one-month pound sterling Libor rate plus 4% gross annualised over five years with volatility in between that of equities and bonds. To achieve this, the mandate has full allocation flexibility across assets that can be accessed via tradable securities.
Morningstar Analyst Silver Rated
John Chatfeild-Roberts and Algy Smith-Maxwell’s high-conviction approach to manager selection has served investors in the Jupiter Merlin Balanced Portfolio well, providing them with significant outperformance of its category peers over time. They run a concentrated list of underlying managers, typically backing them for many years; for example, Neil Woodford and Findlay Park have featured throughout. The fund has outperformed consistently in the tougher years like 2008, 2011, and 2015, doing a better job than peers at protecting investors’ capital, and has outperformed in the majority of other years.
The team’s investment process starts with a thorough assessment of the macro environment, which guides portfolio allocation and influences manager selection. As with manager selection the team’s approach to asset allocation is relatively high-conviction and long-term, albeit constrained by the guidelines of the IA Mixed Investment 40-85% Shares sector for Merlin Balanced. There seems to be enough flexibility to outweigh the high charges, and the fund has outperformed by over two percentage points annualised from inception.
