Thesis risk-rated portfolio mixing ’will cut costs’

Chichester-based Thesis Asset Management has claimed its new risk-rated range of model portfolios that include directly held securities alongside funds will cut costs. Managed on Thesis’s in-house platform, the new portfolios add to the company’s existing range of active and passive model portfolios that invest solely in funds.

Thesis said holding direct securities compared to funds alone can potentially save costs for the client, depending on their appetite for risk. The largest savings are at the top end of the scale, with the greater levels of risk, and decline as the proportion of securities held decreases along with the risk level.

The fund manager reckons that mixing direct securities with funds can provide savings over the conventional funds-only approach of 0.42 per cent for the top end of the range of seven mandates. At level four the saving is 0.31 per cent, falling to no saving at level one, which typically has little or no equity exposure.

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The securities models are available through Thesis with a minimum investment of £25,000.


Provider view

Lawrence Cook, director of marketing and business development at Thesis said:

“Advisers can now offer their clients model portfolios that hold individual securities as well as funds, offering a saving on the underlying management fees within the portfolio. We anticipate that the securities held directly will be selected by our proprietary stock screening system and represent the UK equity proportion of the portfolios. We are exploring the potential for offering this new service through other wraps in future.

“The financial services sector has been seeing downward pressure on fees since the retail distribution review, and like all service providers, advisers increasingly need to demonstrate their value to clients. We believe this innovation will help them to do so. The minimum entry point of £25,000 is a very low entry point to get direct equity investment and really bring a sophisticated discretionary service within reach of a much greater audience.”

Adviser view

London-based James Robson, independent financial planner at John Lamb Financial Planning, said “Of course, it has long been held to be the case that if you buy securities direct and hold them, then you are avoiding all the management costs of funds. So the crucial element is buying and holding. But if there is active trading within the model portfolios I would think that is likely to mean the cost savings decrease. So I would like to see how it works over time. The creation of such new model portfolios tends to mean that to get attention you need something different because there are so many of them. So they have created a ‘hook’, in the form of inclusion of direct equities in the mix with funds. But as I say, the crucial element is the level of trading in the direct securities.”


Annual charges on the model portfolios range from 0.4 per cent (TER 0.65 per cent) to 1.2 per cent (TER 2.7 per cent).


Another variation of the ready-made risk model portfolio range can only help in a marketplace where most angles seem to have been covered. However, the claimed benefit of including securities with funds in the model portfolios is the key point. Of course, other providers may use such securities as exchange-traded funds – even so-called actively managed ones - to obtain similar risk profiles at even lower overall cost.