active, balanced and cautious managed portfolios will launch with £800m of assets
Skandia Investment Management (Sim) is launching a combined offering of fund of funds and manager of managers' products to the intermediary market.
The group, a standalone business from Skandia, is initially launching active, balanced and cautious managed funds of funds, branded investment solutions, into the market this week with an income portfolio set to follow in the summer.
Sim will hire third party managers to run some of the mandates, but will also buy into existing retail funds.
Jamie MacLeod, chief executive officer of Sim, said the three funds of funds will launch with £800m in assets the group has already. This is a mixture of internal money and institutional cash, mainly from the life side of the business. MacLeod believes this will enable Sim to attract managers that are not otherwise available to the retail market to run mandates for the group.
He added he believes the ability to pick from the entire retail fund universe as well as contract segregated mandates to managers who would not otherwise run retail money provides it with advantages over pure fund of funds or multi-manager approaches.
MacLeod said the fund of funds range will be the first Skandia-managed funds launched into the Pep and Isa market.
Clive Hale, Sim's chief investment officer, said the vehicles will have core exposure to 14 segregated mandates, the management of which has been outsourced to groups including Fidelity, Blackrock and Merrill Lynch.
All but one of these 14 funds, the Norwich Union Property fund, have been set up by Sim and the management outsourced.
MacLeod noted using manager of manager products as the core of the fund of funds portfolios reduces the charges Sim pays for third party fund management. He said the TER for the individual portfolios, at 1.85%, reflects this and he is keen to promote this to intermediaries. He said this is on a par with standard mainstream UK equity funds and well below the average for managed funds.
Sim will offer the three portfolios for an initial charge of 5% and annual fee of 1.25%. Intermediary commission is a 3.25% initial with 50 basis points trail.
Management of the Sim fund of funds will be overseen by Hale, who is in turn backed up by a team of 19 fund analysts, comprising quantitative, qualitative and asset allocation specialists. Sim will use the Skandia group's Southampton-based research team and their process, which primarily focuses on the 'four P's' fund groups' philosophy, people, price and performance.
The fund of funds range, which MacLeod said will be gradually expanded into a broad product suite, will be available in the Skandia multIsa, life and pensions wrappers either direct or through the Skandia fundsupermarket. The funds will also be available through Royal Skandia wrappers.
MacLeod said the Skandia Group's saleforce will be used to push the products alongside separate Skandia Group products.
Sim is also launching a second Oeic, which will be used to house a range of single manager funds. Unlike the segregated mandates used in the fund of funds range, these will be sold into the retail and broker market.
The management of the single manager funds will be outsourced to investment managers that are typically not accessible through retail channels.
The first fund, a European equity mandate as already reported in Investment Week, launches in May. The management has been outsourced to Goldman Sach's under the stewardship of David Dick.
MacLeod added he is in the latter stages of recruiting managers to run US equity and fixed interest portfolios for the single manager range.
The single manager funds, as more specialised mandates, carry more standard rates with a 5% front end and a 1.5% annual management fee. Intermediary commission is 3% up front and 0.5% trail. MacLeod envisaged the TERs on the single manager funds will be between 1.75% and 1.8%. These funds will be available either as standalone investments and targeted at the top 200 brokers, predominantly for asset allocation purposes.
Hale's team will also be responsible for identifying target managers for the single manager fund range.
Hale said the 14 segregated mandates, which are held in the three generalist fund of funds offerings, have all been given fixed mandates and their performance will be monitored closely, with Sim analysts able to monitor their daily trades. Rebalancing of the portfolios will be carried out monthly .
'We can fire managers on one day's notice and we have a substitutes bench, so if a manager walks out of his investment group, we have a replacement lined up and we will try and replace managers with ones who run money in a similar style,' Hale said.
Rather than aggressively asset allocate with a high turnover approach, Hale said the blend of management styles in each geographic region should provide steady, consistent performance.
Exposure to the different asset classes will be rebalanced monthly. Holdings will typically be reduced when they reach the top end of the pre-determined benchmark range and increased when they reach the bottom, so profits are locked in and the funds do not buy into the top of any market, Hale added.
Four of the 14 segregated mandates will be UK equity vehicles covering a variety of management styles. Merrill Lynch's Luke Chappell will run a growth mandate and Martin Currie's Jeff Saunders and David Urch will run a concentrated portfolio with a slight value bias. SocGen's Andrew Green will run the third with a growth at a reasonable price tilt, and Statestreet the fourth, a passive fund to rein in tracking error.
US equity exposure is run by MFS on the growth side and Allianz Bernstein on the value side, while Asian exposure is attained through JP Morgan Fleming in Japan and Fidelity in Southeast Asia.
Europe is outsourced to Blackrock's David Stannistreet and ING, while UK fixed interest, both gilts and corporates, is in the hands of Merrill Lynch, and global bonds is with Wellington.
Norwich Union Property provides exposure to that asset class.
Sim has also added to its marketing team with the appointment of Sarah Blagg who joins from Axa. She will work alongside head of marketing David Orr and sales director John Clougherty.
The Aviva Investors Multi-asset Funds (MAF) target equity risk rather than absolute volatility. Thomas Wells, Multi-asset Fund Manager, explains that while absolute volatility varies significantly over time, the inherent risk of investing in equities remains relatively constant.
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