Dynamic Planner has expanded its risk profiling service to include investment trusts, in a move the industry said could encourage more advisers to use these vehicles.
The first risk-profiled trust, Seneca Global Income and Growth Trust, was assigned a risk profile 7 by Dynamic Planner, out of a maximum of 10.
The firm reached this score after it ran an “in-depth analysis” of the trust’s underlying holdings looking back over a period of several months.
It then assessed expected volatility going forward based on its latest capital market assumptions, according to Dynamic Planner’s proposition director, Chris Jones.
He said: “This process includes the evaluation of gearing on individual holdings and this was also carefully considered at the wrapper level for the Seneca Global Income & Growth Trust plc.”
He added: “Investment trusts are the investment vehicle of choice for many investors, and while choice is all important, we believe it’s also vital to maintain a consistency of approach when assessing suitable investment solutions.
“For over 17 years we have helped thousands of advisers understand the risk profile of thousands of model portfolios and open-ended funds.
"We can apply this same trusted model to assess the risk profile of investment trusts because we analyse all the risk characteristics of the underlying holdings of any solution.“
David Thomas, chief executive of Seneca Investment Managers, said: “We were keen to have this analysis undertaken, since Dynamic Planner has provided formal risk profiling oversight of our similar open-ended multi-asset funds for a number of years.
“We are very comfortable with their rigorous process and saw no reason to exclude the trust just because it was closed-ended, given its inherent multi-asset diversification and the tight board control over the level of gearing applied to the underlying assets.”
Dynamic Planner currently risk-profiles over 1,400 model portfolios and open-ended funds and said by including investment trusts, advisers will be able to apply a consistent approach when assessing the suitability of different investment solutions.
Nick Britton, head of intermediary communications at the Association of Investment Companies (AIC), the move could lead to wider use of trusts by advisers and could open the market.
Mr Britton said: “As part of our ongoing education programme, we’ve trained thousands of financial advisers about investment trusts, and we’re keen to break down barriers to their wider use wherever possible.
“One of these barriers has been the lack of availability of risk-profiling for investment trusts, which many advisers have told us is essential to their research process.
“This news from Dynamic Planner is an encouraging sign that one more barrier to investment trust use is on the way to being removed, smoothing the path to wider adoption of investment trusts among financial advisers.”
amy.austin@ft.com
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