Whether chosen by an adviser or client, outsourcing of investment decision-making appears to be the key factor defining who would use a risk-defined fund.
Martin Bamford, Chartered Financial Planner and managing director at Informed Choice, says risk-rated, risk-targeted and risk-managed funds would typically appeal to investors without an adviser.
He says those investors who want a ‘hands off’ approach to investing might effectively outsource important risk management to a fund manager.
Lorna Blyth, investment marketing manager of Scottish Life, says rather that risk-rated, risk-targeted and risk-managed funds should be considered by adviser firms who are looking to outsource the investment process and provide an off-the-shelf investment solution.
Michael Holland, managing director of FE, says these funds are suitable for investors who want an investment proposition within one fund and who wish to have it fully managed for them.
Patrick Connolly, Certified Financial Planner at Chase de Vere, says risk-rated, risk-targeted and risk-managed funds are most suitable for those with smaller portfolios who are looking for an ‘all-in-one’ solution to achieve a suitable level of diversification.
But even with these funds aiming to highlight the amount of risk they are taking or a targeted level of volatility, Mr Connolly says it is unlikely that any will be an exact fit for the investor’s needs and so some form of compromise will probably be required.
Mr Connolly says: “These funds might also be suitable for those investors who aren’t taking ongoing financial advice.
“The challenge for the investor is in trying to find the right fund to suit their needs, but at least by having an understanding of what a fund is trying to achieve then they shouldn’t go too far wrong.”
