Discretionary fund managers will increasingly look to unquoted stocks, despite the liquidity concerns raised the Woodford debacle, the chief executive of Octopus Investments has said.
Ruth Handcock told FTAdviser she expected to see increasing numbers of DFMs invest in private markets such as renewables or venture capital.
“Very understandably, the experience of Woodford has made many people nervous about investing in unquoted assets, but I think that is now starting to change as they wake up to the opportunity it can present for diversification and growth,” she said.
Hancock said although private markets were never going to be a big part of a diversified model portfolio, there was a compelling argument for an allocation of around 5 to 10 per cent, a level at which liquidity should be manageable.
“I expect to see more technology and product structure solutions enter the market to help DFMs and private banks manage this allocation alongside daily priced investments," she said.
“The FCA’s introduction of the long-term asset fund regime also indicates the direction of travel.
“The new rules should help to encourage investment in assets such as venture capital, real estate and infrastructure, while providing more realistic expectations around liquidity.”
ESG simplification
Ruth Handcock said she hoped 2022 would see some simplification in the way ESG, sustainability and responsible investing were discussed.
“There is a crescendo of frustration from financial planners that they can’t explain the different options clearly to clients, and it feels like something has to give,” she said.
She added most financial planners still struggle to explain to clients what a sustainable portfolio delivers, and how that differs from the standard portfolio offering, and what impact their investments will really have.
There’s also been lots of consolidation in the advice industry over the past few years, and my hope is that this could help to ease some of the recruitment challenges in years to comeRuth Handcock“The demand from consumers to make a positive impact with their money is growing all the time, but we need a framework to facilitate this.”
Fund and asset managers contribute further to this confusion, she said, as they all use different definitions.
“But that’s partly a symptom of a lack of high-quality data and reporting standards, which makes consistency impossible.
“That’s why it isn’t enough to tackle just one part of the problem, we need system level change.”
sally.hickey@ft.com
