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Discretionary Fund Management - March 2015



    This can include the use of centralised investment propositions, model portfolio services, multi-asset or multi-manager solutions right through to bespoke wealth management and discretionary managed portfolios.

    Research from The Lang Cat and CWC Research in their report Never Mind the Quality, Feel the Width on the CIP market, shows that 70 per cent of the sample surveyed by CWC Research used their own model portfolios.

    In addition, in the comparison between multi-asset or multi-manager solutions and discretionary fund managers (DFMs), the average proportion of assets under investment held in multi-manager solutions was 27.5 per cent compared with just 17.5 per cent held in DFMs. Cost, performance and methodology were the three most common criteria for choosing the eventual solution.

    As we move further into 2015, there are a number of headwinds that look set to keep the wealth management and private client industry on its toes. This includes regulations that seek to restrict the retail distribution of certain instruments such as contingent convertibles, with the Wealth Management Association (WMA) noting in its response to an FCA consultation: “In line with previous WMA comments about the lack of clarity around elements of the non-mainstream pooled investment definition, we believe that the ‘contingent convertible instrument’ definition as currently drafted does not provide firms with the level of certainty that they need in order to develop rigorous and consistently-applied controls.”

    Other potential headwinds include the macroeconomic environment and the need to perhaps further diversify a portfolio to deliver returns in a low-growth environment, but with the requirement to also keep risk within set parameters in order to meet client needs. Then there are the technology and compliance needs facing discretionary managers where more and more people want to make their decisions remotely.

    Figures show that the assets of the UK wealth management industry continued to increase in 2014, but with more focus on costs and performance and what investors get for their money, this year could see further pressure on the industry to be more transparent in how and what they are delivering.

    Nyree Stewart is features editor at Investment Adviser

    In this special report


    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. Which of the major equity regions are the most expensive, according to Old Mutual’s John Ventre?

    2. Assets held by UK wealth managers reached £550bn at the end of September 2014, which is an increase of how much?

    3. What is the average proportion of assets held in DFMs, according to a research report from the Lang Cat and CWC Research?

    4. Financial Express has ventured into new territory with the creation of risk-targeted multi-asset solutions sectors, but which of these is NOT a risk band featured in the range of sectors?

    5. The regulator’s thematic review on centralised investment propositions noted what proprtion of advice provided by firms on CIPs to be either unsuitable or unclear?

    6. Research from ComPeer noted that total revenue among wealth managers declined in the third quarter of 2014, highlighting a potential headwind. By how much did total revenue fall?

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