The Flexible peer group typically includes funds that used to be in the IMA’s old ‘Active Managed’ group, which was the most aggressive in the range on equities exposure. However, while most of the funds in this grouping have an equities bias, some do make use of the 0-100 per cent leeway on equity exposure to batten down the hatches in difficult market conditions. Understanding who will or will not go to those extremes is vital in looking at potential solutions in this area.
Some multi-asset funds are not in the IMA’s Mixed Investments peer group because they have specialist mandates that either do not fit within the constraints of the equity exposures, or for which the Flexible sector would give a misleading label.
Non-IMA fund groupings
A new type of multi-asset fund that has become significant, growing in popularity in the post-RDR environment, is the risk-targeted fund.
The manager of this type of fund typically performs ongoing rebalancing of the portfolio to stay within mandated volatility bands. This can be very useful to an adviser, who has performed the regulated ‘know your client’ due diligence, including the appropriate risk profiling.
The fund factsheet will normally set out the risk target for this type of fund, and usually it will be part of a family of funds, which together offer a continuous range of risk targets. Critical here is to make sure that the fund manager of such a fund adheres to the stated bands or keeps within the boundaries.
Manager meetings
To get further clarification on the investment objective and process, the adviser can ask for a meeting with the manager. Many of the larger fund management groups try to protect managers from client meetings and offer meetings with a product specialist instead. This makes sense because too much time spent away from managing the fund can ultimately hurt client interests.
The primary role of the product specialist is to communicate to potential and actual investors information about the fund from a technical, investment perspective rather than from a propositional one. Manager meetings are extremely useful for due diligence purposes because the manager is able to give insight into the ongoing management of the portfolio: how decisions have been made but more importantly how the process allows for sticking to the mandate.
It’s worth knowing that some fund groups do give presentational training to their fund managers and therefore sometimes a slick presentation lacks authenticity. On the other hand, some very capable fund managers may not communicate their strengths that well.
