asset allocator header image

Asset Allocator

from Asset Allocator

LGIM backs boutiques for income; Sign o' the times spent on reporting

Been forwarded this email? Sign up here.

For our fund selection podcast, tune in on Acast or Spotify, or find us on Apple Podcasts.


Suits you, sir

LGIM soft-launched its new MPS proposition to the adviser market at the end of 2021 but it is now hoping to make more of a splash as it rolls the product range out to a wider market.

Probably the splashiest thing about the range is the fee - 6bps inclusive of VAT on a range of 25 portfolios which include index funds and also blended strategies.

The range brings together the index fund team and the multi-manager fund-picking team.  

Justin Onuekwusi, LGIM's head of retail products, says the aim is to provide "model plus" portfolios, with the plus being the tailored piece added onto the model to more closely align it to a specific goal a client may have.

Onuekwusi says that in the current climate "income products need to be bespoke" but LGIM also offers an off-the-shelf portfolio for those who want it. 

In terms of what will be in the portfolios, he says when targeting "a really high income" his preference is to use boutiques, because they are able to "push the boat out" and invest in a wider range of instruments to get a higher yield.

He particularly feels high-yield bonds should only be accessed via actively managed funds.

This is a position shared by many DFMs: the three most popular high-yield bond funds in our database are all active (Baillie Gifford High Yield being the most popular).

On the issue of boutiques, there is a certain degree more agreement with Onuekwusi: Evenlode Income and Chelverton UK Equity Income are tied as the fourth most popular UK equity income funds (indeed Evenlode Global Income is one of the most popular global income funds).

Nonetheless, there are five income portfolios in the range, as LGIM attempts to solve perhaps the trickiest problem facing allocators right now: how to deliver an income worth having as inflation massacres portfolios.

Central casting

Most Asset Allocator readers won't, of course, need convincing of the merits of advisers outsourcing their investment management function.

But a report which has found its way into Asset Allocator's pigeonhole offers some clues as to the cost to advisers of maintaining a Centralised Investment Proposition in-house. 

The research, conducted by Copia Capital Management with the Lang Cat, found advisers now spend 71 days a year looking after their CIP, and in a post-Mifid world, 97 per cent of advisers find themselves questioning the long-term viability of CIPs that are managed in-house. 

Now 71 days is longer even than the mother-in-law usually stays, so let's unpack a little what advisers are doing with the time.

According to the research, portfolio monitoring accounts for 15 days of the advisers' time and maintenance takes 12 days, but the marmalade dropper in the data is the 31 days a year spent on reporting activities.

And it appears scale does not solve this problem, as firms with AUMs above £250m spend more time on each of those activities, with 40 per cent more time spent on monitoring and 39 per cent more on reporting.

Of course, even outsourced portfolios must be monitored and reported on by the adviser, but the time saving can be considerable, with the research indicating around 72 per cent less time on maintenance and 30 per cent less on reporting.

Get the story behind the stories
The daily newsletter for fund buyers