AJ Bell has catapulted itself into the fund management space with the launch of five multi-asset passive funds designed to meet a range of client risk profiles.
The ongoing charge figure of the funds will be capped at 0.5 per cent a year and the investment firm will waive the platform levy for holding the products until January 2019.
The suite will be managed by AJ Bell’s investment team including Ryan Hughes, head of fund selection, and Leon Diamond, head of investments.
The asset allocation of the funds will be updated quarterly so that they consistently perform in line with the risk level selected for each client, the investment firm said.
The AJ Bell range’s investment allocations will be split across four asset classes: equities, bonds, property and cash.
The funds have been designed to meet a wide range of client risk profiles – cautious, moderately cautious, balanced, moderately adventurous, adventurous.
They were launched on 27 March to enable advisers to use any of their client’s unused Isa or Sipp allowances before the tax year end, according to the firm.
There is a fixed price of £1 during that period before the funds start trading on 18 April 2017.
Provider view
Andy Bell, chief executive of AJ Bell, said: “Advisers are increasingly turning to passive investment solutions to keep costs low for their clients and many are choosing to outsource investment management to third parties so they can focus on their core financial planning services.
“To meet that demand we have built a range of diversified multi-asset funds and are mapping them to the main risk profiling tools advisers use so they can easily incorporate them into their existing business processes.
“The funds themselves are already very low cost, but we have also decided to waive our platform fee until at least January 2019, meaning the total cost advisers' clients will pay is among the lowest in the market for an investment solution like this.”
Adviser view
Sebastian van Mook, financial adviser at Shropshire-based Abacus Associates, said: “I do not tend to use multi-asset funds. If I want something of that ilk I tend to go down the discretionary fund management route. I think it is easier to manage exchange rate risk, for example, by using DFMs. Multi-asset funds are quite restrictive. They might fall out of favour when you look at bonds investments.
"Traditionally, bonds have been the cautious asset within a multi-asset fund, but they have not been performing well in the current investment environment – with an increase in [US] interest rates on the horizon."
He added: “It sounds contradictory, but I hold a view that passive portfolios should be actively managed to generate good performance.”
Charges
OCF of 0.5 per cent.
Verdict
The outlook for conventional bonds is bleak as global markets brace for numerous hikes in US interest rates. Advisers are now tasked with replacing the low risk part of their portfolio. Given their diversification credentials, multi-asset funds could go some way to occupying the vacancy.
Here, the five funds are passive, which means they command a lower OCF compared to active equivalents. However, price should not be the sole consideration in the due diligence of investment solutions. Active leaning advisers would argue that the active managers earn their corn by delivering index-beating performance.
