AJ Bell has launched a set of portfolios made up of passive funds, aimed at generating ‘pure-alpha’ by keeping costs very low.
The five risk-rated portfolios, which are rebalanced on a quarterly basis, are diversified across asset classes and regions.
Billy Mackay, marketing director at AJ Bell, said the investment platform had decided to use passive funds as the underlying investments in order to keep costs low for advisers and their clients.
“Advisers’ use of portfolio services has been on the increase since the Retail Distribution Review, but the costs and transparency of traditional services have not kept pace with the direction of travel in the market,” he said.
“Also, in a low-growth, low-inflation world, keeping costs down is the purest form of alpha for a client.”
Managed by AJ Bell’s new investment management business, created earlier this year, Mr Mackay said the portfolios also help advisers meet their regulatory obligation by ensuring investments meet client needs.
Portfolio asset allocations:
| Portfolio 1 (Lowest risk) | Portfolio 2 | Portfolio 3 | Portfolio 4 | Portfolio 5 (Highest risk) |
Fixed income | 60% | 55% | 45% | 35% | 20% |
UK equity | 6% | 9% | 12% | 10% | 12% |
Overseas equity | 14% | 21% | 28% | 40% | 48% |
Alternatives | 5% | 10% | 10% | 10% | 15% |
Cash | 15% | 5% | 5% | 5% | 5% |
The new Managed Portfolio Service is designed as a long-term investment to ride out market volatility, Mr Mackay explained.
“Our focus has been to build a service that is easy to understand for both advisers and their clients, fits into the existing business processes of advisers and offers their clients a competitive deal.”
The portfolios, which have been mapped to the risk profiling tools from Distribution Technology and Finametrica, have an annual management charge of 0.25 per cent, plus VAT.
The passive funds have an ongoing charge figure ranging from 0.18 per cent to 0.22 per cent, meaning the total cost for the complete investment solution is between 0.48 and 0.52 per cent.
katherine.denham@ft.com
