The financial services industry can often seem saturated with identical providers producing identical products. Advisers could be forgiven for thinking that little differentiates the major product offerings from fund groups, life offices and technology providers. Advisers need all the guidance they can get about the best products and providers.
The Real Adviser Awards - formerly the MultiManager Awards - aim to set a benchmark for excellence in managed solutions. This year's awards included a number of new categories incorporating wrap provision, reporting and technology. The new awards were voted for by Real Adviser readers in association with Incisive Research. The multi-manager awards were decided by our panel of judges (biogrophies of whom can be seen to the left) and rewarded consistent, long-term performance. Last year's research award was voted for by a select group of fund managers. This year, this award was broadened out to all IMA-listed firms. Over 50% replied, so the award truly represents the fund managers' views on the best multi-manager.
Three groups stood out. Skandia beat off its rivals to win five awards - best provider of third-party fund links, best reporting, best overall service, best wrap provider and best life provider. Jupiter was always going to struggle to follow last year's triumph when it walked away with five awards, but the group still scooped three awards this year - best group, best growth fund and best international. Credit Suisse picked up two awards - the prestigious best research award and the best cautious and income fund award. A special mention should go to Fitzwilliam Multi-Manager, which won the best balanced growth fund. The funds are run by accounting group BDO Stoy Hayward and are still relatively small, but have put in top performance against some stiff competition from larger rivals. This could certainly be a group to watch in the future.
The multi-manager awards were fought out by Jupiter, New Star and Credit Suisse, leaving their competitors a challenge for next year. Skandia's dominance in the life and pensions arena also gives its rivals something to aim for. Congratulations to all the winners.
Meet the judges
Martyn Ingram has over 20 years' experience in the financial services industry and has been a founding director of the National Association of Broker Fund & Investment Managers Limited, a member of the London regional panel of the Association of Unit Trusts and Investment Funds (AUTIF) and is an Affiliate of the Securities Institute. Martyn is currently the CEO of fund consultancy Investors Partnership.
Now running an independent fund of funds consultancy, Paul Talbot has more than 40 years' experience in the City, including being sales director at Fidelity, managing director of Edinburgh Portfolio and a member of the Edinburgh Portfolio Investment Committee. He was among the pioneers of the multi-manager approach in the UK retail financial services industry.
Brian Harvey is head of UK research at Lipper. Prior to joining Lipper in June 1998, Brian was head of statistics at AUTIF (The Association of Unit Trusts & Investment Funds, now known as the Investment Management Association), where he carried out research for the AUTIF Performance Category Review Committee. In addition, he was also involved in the development of AUTIF's business statistics service that reports UK industry data.
Cherry Reynard has been editor of RealAdviser since its launch earlier this year. Prior to that, she was deputy editor of Fund Strategy, where she won the 2004 investment trust trade journalist of the year. She started her journalism career at Citywire and then Investment Adviser. She moved into journalism in 2000, following a City career that included PriceWaterhouseCoopers and JP Morgan.
• Best Provider of Third-Party Fund Links
• Best Reporting
• Best Overall Service
• Best Wrap Provider
• Best Life Provider
Skandia pioneered the concept of third-party links and the other life companies are now struggling to catch up. It introduced the concept of using external fund managers to manage life and pensions money twenty years ago and has since built up over £25bn under management. Early adoption of funds links has put it 15 years ahead of the rest of the market, leaving it the brand to beat. It offers products across the spectrum and has built up a reputation for service in a sector not famed for its efficiency. The Self Select range offers access to over 360 funds from 42 fund groups and the range is constantly expanding. Funds are included based on intermediary demand - Skandia makes no qualitative judgment on the funds. Intermediaries can use its U-Select tool to help with asset allocation and fund selection. 35,000 intermediaries are currently registered as users of Skandia's technology.
Skandia has recently announced sales growth of 22% over the same quarter last year, driven by strong pension and offshore sales. The pensions business has been helped by regulatory changes - sales of its A-Day friendly range have grown 30% over the period. Sales on the Skandia MultiFunds platform have grown 10%. These are statistics few life companies could boast.
Skandia, above all, answers many of the questions about the future for life offices. It has shown that it is possible - with the right product range and good client service - for life offices to win new business and expand. The real question now is whether anyone can challenge Skandia's dominance.
• Best Pension Provider
Established in 1825, Standard Life has one of the longest pedigrees in financial services. It is Europe's largest mutual life assurance company, with total assets under management of £117bn, though it has plans for a flotation. It offers a comprehensive pensions range, including Sipps, personal pensions, group pensions and annuities.
Advisers who voted for Standard Life repeatedly drew attention to its excellent service and administration. It attracted comments such as "Ahead of the game"; "Best on performance, service & cost"; "Exceptional administration and service".
The Standard Life Sipp has attracted more than £1bn since its launch at the end of 2004. The group expect demand to remain high in the run-up to A-Day. The group is planning a number of enhancements to its Sipp offering over the next few months to widen its appeal - it has previously been a product used mainly by high net worth clients. Standard Life developed an agreement with FundsNetwork to distribute its Sipp.
From 6 April 2006, the Standard Life SIPP will offer residential property (such as buy to let properties) as a pension asset, the potential to create a "family Sipp" which would allow pension assets to be passed to subsequent generations and no requirement to buy an annuity by age 75.
Standard Life also has its Sigma platform for personal pension funds. This contains a wide range of external fund providers and is constantly monitored and updated. The group has also recently developed its adviser extranet to provide better service to advisers - www.adviserzone.com now includes fund valuations, investment instructions, cash transactions as well as the latest updated value of other investments such as property and stocks and shares.
• Best Technology
Technology for advisers has come a long way over the past five years. It has done much to minimise the burden of regulation and administration. 1st Software was amongst the first into this market and emerged ahead of its newer rivals to win the Best Technology award. 1st Software was launched in 1996 to develop and market software systems for financial advisers. It now has over 1,400 Firms, over 1,650 sites and over 11,000 licensed users. In the last four years it has made over a thousand amendments to its Adviser Range. These include large-scale developments such as needs analysis, document enablement, integration with Microsoft Outlook and CGT calculators.
The latest version of Adviser Office, Intelligent Workflow, is a client management system covering financial planning, portfolio management, retirement planning, protection, mortgages and corporate benefits. 1st Technology aims to enhance the sales and advice process, though pre-filling fact finds and application forms with client data, producing graphical needs analysis and client financial reports. It also helps manage client service and administration, with online valuations, policy servicing, a central database, event tracking and automatic document production.
Overall, the group aims to help advisers maximise business productivity, so they can spend more time on advice. To this end its software has business prospecting, compliance and marketing functions and produces full audit trails and compliance reports. At a time when more and more advisers are coming to rely on technology to build better businesses, 1st Technology has stolen a march on its competitors.
• Best Research
• Best Cautious & Income Fund (Credit Suisse UK Income)
Credit Suisse Asset Management (CSAM) appeared in the awards for the first time this year as the group hit its three-year track record. Rob Burdett and Gary Potter joined in June 2001 from Rothschild Asset Management, where they managed over £1.2bn. The team is now six-strong and has over 70 years' collective multi-manager experience.
CSAM recently boosted its funds under management with the acquisition of the Artemis Multi-Manager range. The merger was finally completed this month, leaving the group with 17 funds in total. The group has also recently launched the Credit Suisse Incubator fund, which invests in smaller funds, funds from boutique houses or managers with unrecognised experience. This was launched as a non-Ucits Retail Scheme, giving the group more flexibility.
CSAM was nominated across four out of the seven categories and was a clear winner for the best research award, getting almost double the number of votes of its nearest rival. Fund managers saw it as thorough, well-prepared, with good market knowledge and team strength.
The UK Income fund has been a top performer, which has benefited from exposure to some of the top-performing income funds this year, including Artemis Income, run by Adrian Frost and Framlington Equity Income, run by George Luckcraft. At a time when top-performing income funds are like gold dust the UK Income fund offers one of the best options on the market.
• Best Specialist
This year the Best Specialist sector included all single country funds, including the UK and, as such, was a broad sector. Stellar returns ensured New Star European triumphed for the second year in a row. New Star was also short-listed in all but one other category, showing the strength of Mark Harris and Craig Heron's team and its process.
New Star's success has come from a combination of rigorous fund selection and disciplined portfolio construction. Before a fund is considered for investment, it will be benchmarked against similar funds and screened statistically, assessing its management style and relative risk. Funds are monitored over time, helping build a profile of all targeted funds. All funds are reviewed to check that they continue to do the job for which they were bought.
The team also aims to add substantial value through portfolio construction and using the right funds at the right time in the market cycle. Style rotation has been an important source of returns. Harris says: "With business-cycle investing, different styles will do well at different times. Take George Luckcraft and Neil Woodford - both great managers - our research shows that if there is a big up period with the FTSE 250 doing well, Luckcraft will do well and vice versa. By tilting exposure to the two managers, we can boost returns."
Asset allocation is also an important source of returns for the New Star team. Harris aims to make up two-thirds of returns from fund selection and one-third from asset allocation.
On the European fund, the outperformance of its major holdings has boosted performance considerably. Artemis European, JO Hambro European and Britannic Argonaut have all been top quartile. The fund has also benefited from exposure to emerging European funds, such as the Jupiter Emerging Europe fund.
• Best Group
• Best Multi-Manager Growth Fund (Jupiter Merlin Growth)
• Best Multi-Manager International Fund (Jupiter Merlin Worldwide Gth)
Jupiter walked away with three of this year's awards, having cleaned up with five in 2004. This is a fitting tribute to a multi-manager team that many believe sets the benchmark for the rest of the industry. John Chatfeild-Roberts is ably supported by Algy Smith-Maxwell and Peter Lawery on the Merlin range of funds. The team also manages a fund of hedge funds and a fund of investment trusts.
The distinguishing characteristic of the Jupiter team's approach has been its uncanny ability to make money out of asset allocation in all types of markets. While other multi-managers aim to be neutral on asset allocation, Chatfeild-Roberts has spoken of a 'moral obligation' to add value through asset allocation as well as fund selection. As such, he is willing to back both long and short-term market trends.
Competitors believe that this can increase both risk and total expense ratios, but the Jupiter team has exploited asset allocation trends without a discernible increase in fund volatility or expenses. For example, current themes in the portfolio include high oil prices and the development of the BRIC countries (Brazil, Russian, India and China).
The Merlin Growth fund has returned 76.1% over the three years to 24th October, while the Merlin Worldwide Growth fund has returned 69.2%. The judges believed the group deserved the group award for the second year running for its consistent outperformance across the Merlin range. There are no weak funds in the range and the group set an example to multi-managers everywhere on how thoughtful, intelligent fund management can generate long-term returns for clients.
Cofunds was highly commended in three categories - Best Provider of Third-Party Fund Links, Best Technology and Best Fund Supermarket. Cofunds was set up in 2001 by four fund management groups - M&G, Threadneedle, Gartmore and Jupiter. The platform now has over £5bn under administration. Fund administrator IFDS became the fifth shareholder in 2003. The group also got a boost in 2005 Legal & General took a stake.
Cofunds has just announced the structure of the new Legal & General Investment Bond, which includes a choice of over 200 funds from 40 fund groups. Other recent initiatives have included the introduction of web-based customer statements and consolidated tax vouchers.
Winterthur Life was a runner-up in the Best Reporting category. It was originally established as Provident Life Association in 1877, The Winterthur Group acquired the company in 1981. In 1995, the group was rebranded and when Credit Suisse bought the company, it kept the brand. The acquisition of the UK business of Australian group Colonial Mutual brought a hefty chunk of assets and thousands of new policyholders. Winterthur was one of the first groups to take an outsourced approach to the investment management of its life and pensions products. It has also built a strong in-house multi-manager team, which manages the 'Elite' range of funds.
Selestia was highly commended in the Best Wrap Provider category. Selestia's assets under administration has just hit £1bn, a tribute to both the Selestia product and the growing power of wrap. The group offers a range of investment tools that advisers can use to construct and maintain investment portfolios, taking into account investor risk, asset allocation and fund selection. These tools offer an audit trail, online transacting, low-cost switching, consolidated valuations, automatic portfolio rebalancing and back office integration. It also offers state of the art asset allocation tools.
The group now offers access to over 700 funds from 57 fund managers on the platform. This is increasing all the time. Its range includes one of the largest institutional manager of managers.
Axa Sun Life
Transact was highly commended in the Best Wrap Provider category. Transact's proposition has been built on the idea that advisers must re-engineer their business to incorporate wrap, but once they have done so that can create administrative efficiency, greater profitability and embedded value.
Transact has one of the best pedigrees in the wrap market. It has been around the longest, since 2000. Its service has been built with Australian backer ObjectMastery. Australia is amongst the most sophisticated markets for wrap, so the technology has been tried and tested. It sees itself as a wrap provider in the traditional sense, providing aggregation of investments and tax wrappers. It now has over £1.5bn on the platform across 1,500 advisers.
Axa Sun Life was runner-up in the Best Life Provider category. Axa can trace its roots back to the 18th century, although it didn't hit the UK in its current guise until 1985. Axa Sun Life was formed in 1997 after the merger of Sun Life Group and AXA Equity & Law and is one of the leading players in the UK life, pensions and investments industry.
Recent initiaves have include the launch of a comprehensive A-Day support package for advisers - the Axa Pension Auditor. This is a web-based series of presentations outlining all the key topics and issues that advisers need to consider with their clients to maximise their pensions arrangements in advance of April next year.
Scottish Widows was highly commended in the Best Pension Provider category. One of the best-known brands in the UK, it was founded in 1815 as Scotland's first mutual life office. It now runs over £82bn in client funds. It began to establish third-party links in 2001. This has been built to complement the Scottish Widows Investment Partnership range. It uses OBSR, S&P and Citywire to select its fund partners.
It was also one of the first life offices to build an agreement with a manager of manager provider for life and pensions products. It chose US group Russell, one of the largest global providers of manager of manager solutions. It now offers four equity products in conjunction with Russell - International, UK Focus, Growth and Income.
• Best Fund Supermarket
Fidelity FundsNetwork has taken expertise established in the US to build a robust and comprehensive fund supermarket for the UK market. Advisers commented on its top-class administration, wide range of fund managers and straightforward technology. One adviser said: "FundsNetwork has the widest range of funds, its re-registration facility is easy and available. Switching is easy and low cost. Initial charges are generally the lowest." Another adviser commented that the group provided: "Compliance and research facilities for those investors who don't have sufficient level of assets for an individual portfolio."
FundsNetwork launched in 1999 and now has over £4.5bn invested. It provides access to over 900 funds from 53 fund management groups. Many of the funds hold an initial charge of just 1.25% and some have no charge at all. FundsNetwork won plaudits for the transparency of its charging and low switching costs.
The group offers Morningstar factsheets to help advisers select funds and a chart tool to help compare different investments. The group's account management systems allow advisers to see clients' exact worth at any time by displaying all individual holdings and their current value.
FundsNetwork is about to launch its new Portfolio Planner. This follows nine months of research and development to establish advisers' needs from a portfolio planning tool. The group believes that while 85% of advisers currently use these tools, many are not served adequately by them. The FundsNetwork Portfolio Planner will enable advisers to create, manager and view portfolio investments plans for their clients. The group believes it brings a 'real world' wrap service one step closer.
Norwich Union was highly commended in the best pension provider category. It offers substantial choice to advisers through its links with Investment Manager Selection for fund of funds and Aon Asset Management for manager of managers. The group also has a link-up with wrap platform Lifetime, which has an open architecture offering.
The group has recently launched a new approach to retirement planning. The Retirement Solution will restructure its pension strategy by writing all new pensions policies under a single scheme. It will allow customers to move easily between products, depending on their individual circumstances. It includes simple products for those in the early stages of retirement saving, through to the more sophisticated pre and post retirement options
Margetts was highly commended in the Multi-Manager Growth category. This boutique house has generated strong, consistent returns on its Venture Strategy fund. The group differentiates itself with its risk-rated approach - it constantly monitors the risk profile of the assets within each of its four funds to ensure that the level of risk hasn't shifted. It believes this means clients know exactly what they are getting.
The funds generally run with 15-20 underlying funds. Fund selection is decided by reference to both qualitative and quantitative factors. The group has no restrictions in terms of track record or size. Manager Toby Ricketts has no hard buy or sell procedure but underperforming funds are put under review.
Hargreaves Lansdown is better known for its large advisory practice, but has also been creating good returns on its in-house fund of funds. The Multi-Manager Special Situations fund is a best ideas portfolio. Managed by Lee Gardhouse & Stephen Yiu, the fund takes long-term positions in managers who are willing to invest away from the crowd.
The fund has around 25 underlying fund managers investing in UK, Europe, USA, Japan, China, Eastern Europe and the Far East. The team aim to select managers who have demonstrated a clear and consistent ability to choose top performing stocks.
• Best Balanced Gth Fund
Fitzwilliam appears in this year's awards for the first time after returning stellar three-year performance on its Multi-Manager fund. The fund is run by accounting firm BDO Stoy Hayward, principally for clients of its accounting business although it is available to all investors. The fund is now has assets of around £80m and has seen rapid growth in the past 18 months both from new investment and strong performance. Sharon Segal, head of the multi-manager team at BDO Stoy Hayward and lead manager on the fund, says that the fund is concentrated and actively managed, which have both helped performance over the past three years.
The group's approach to fund management is pragmatic. They are willing to take a view on asset allocation, but are generally long-term holders of funds. The fund has a maximum of 20 funds and only holds 17 at the moment.
Segal says that the group starts with a quantitative screen. She adds: "This helps us establish how a fund is run, its risk parameters, when it will do well and when it will struggle." This is run every month and is used for comparing funds. The group will also keep an eye on poorly-performing funds that have a catalyst for change.
Then the team will look at qualitative aspects - whether a fund is run from a boutique house, the resources behind the lead fund manager etc. Segal says: "We tend to favour boutique houses because there is equity participation. This doesn't mean we won't use large houses, however. We hold Anthony Bolton's Special Situations fund, for example. We really want to see that the fund manager is being given the leeway to run money according to his own convictions. We don't want people who are benchmark constrained."
As long as this is in place, the group has no overall preference for an individual versus a team approach. Segal has found that the UK managers within the portfolio (around 60%) tend to take a more individual approach, while the US and Far Eastern managers tend to be team-based. Segal also believes that a close relationship with the fund managers has served them well over the past three years. They are in frequent contact with the managers they hold and know what is going on in their portfolios at any time. She adds: "For example, I could e-mail Ed Burke and ask him what is going on with Marconi and he would get back to me straight away. We stick with our fund managers and some we have held for 5-6 years."
The fund has relatively low turnover as a result. Segal says that just as the team does a lot of research when it buys a fund, it will also do a lot of research when selling. The team will, however, alter the weightings in the fund or take profits as the market changes. The investment team is four-strong. Segal was previously a small and mid-cap fund manager at Morley and has eight years' investment experience. She is supported by Kristian Cassar and Stuart Clark. Cassar has five years' experience and is responsible for developing and launching the group's fixed income offerings. Clark has four years' experience in quantitative and qualitative analysis of funds and portfolio construction. They are all supported by economist Shaun Port, who has 11 years' experience and helps with asset allocation decisions.
Top holdings in the fund currently include Invesco Perpetual Income, New Star UK Growth, Framlington Monthly Income and Old Mutual Corporate bond. The fund is a top quartile performer over one, three and five years and has returned 125% since its launch in July 1995. It is a worthy winner of the Real Adviser Best Balanced Growth award and is likely to give some of the larger groups something to think about.
With the vast bulk of client money now going on to platforms, who really benefits? The client, the adviser or just the platform provider?