Prudential has commissioned AKG to undertake an independent review of its smoothed multi-asset PruFund range to make sure advisers understand how the funds are managed.
There has been growing demand for the PruFund range, which was launched in 2004, with APE sales increasing 29 per cent to £564m and assets under management reaching £30bn.
Among the report’s conclusions are that financial advisers need to be clear about exactly what activities and responsibilities are being assumed by the company behind the managed fund/portfolio solution.
If the solution uses underlying funds or mandates, advisers need to understand what the associated manager research and interview processes and resources behind the proposition are, according to AKG.
They also need to understand how the investment mandates are issued and monitored and how the manager seeks to diversify within the fund, AKG stated.
The research was carried out by AKG and Prudential said it will support the 4,000 advisers who use the PruFund range.
Matt Ward, communications director at AKG, said: “With a proliferation of outsourced investment solutions for advisers to select from there has been an increasing focus on how these solutions are operated.
“What is the management style? How do they select managers/stocks? What is their structure? What size are their teams? Who is responsible for what? What processes do they have in place to underpin the delivery of the multi-asset fund or portfolio?
“Performance and cost will continue to present themselves as differentiators for outsourced investment solutions, although AKG believes that over time the ability of a fund or portfolio to meet its core, stated objectives and to operate within its stated parameters will be of ultimate importance to advisers and investors.
“Therefore, the quality of the underpinning governance structure and the risk management processes employed will also become key differentiators.”
The PruFunds range is designed to spread investment risk by investing in a range of assets and protecting investors against some of the ups and downs of the market by using a smoothing process.
The funds are managed by the Prudential Portfolio Management Group, a team of 80 in-house investment specialists.
Paul Fidell, investment expert at Prudential, said: “Asset allocation is a highly specialist skill and many advisers are recognising the benefits of outsourcing this part of the financial planning process.
“Outsourcing does not, however, mean an abdication of responsibility and it is vitally important that advisers understand not only the features of the products that they are recommending to their clients but also the governance and management structure that sits behind them.
“It is something that the regulator is particularly hot on and is why we’ve asked AKG to undertake this extensive review.”
Dan Clayden, a financial adviser with Devon-based Clayden Associates, said: "It makes sense in the same way that when an adviser recommends a structured product they should be having an idea of how the investment is made up and to be able to explain to the client any associated risks and benefits."
Advisers can access a free copy of the report on pruadviser.co.uk.
damian.fantato@ft.com
