m&G's balanced fund of funds will be 20% underweight fixed income and hold 4% in cash
M&G's Balanced fund of funds, to be run by Cazenove, will be underweight fixed income and hold about 4% cash when it launches later this month.
Mark Harries, head of multi-manager at Cazenove, said the biggest bet in the portfolio is its underweight fixed income position at 20% compared with the benchmark weighting of 25%.
'That is basically through underweighting the gilt market, which we believe is expensive. That has been moved primarily into cash and a slight overweight in equities,' he said.
The fund has a composite benchmark comprised of 55% FTSE All Share, 20% FTSE World ex-UK and 25% fixed interest, made up of 15% FTSE All Stocks and 10% Merrill Lynch Sterling Bond Index.
The model Balanced portfolio is invested 76% in equities, made up of 56% in the UK, 13% in the US, 4% in Europe, 2% in Japan and 1% in the Far East.
Its 20% fixed income exposure is split evenly between the M&G Gilt and Fixed Income fund and the Old Mutual Corporate Bond fund. The fixed income fund is the only M&G portfolio holding within the fund.
M&G Balanced will launch alongside two other fund of funds products, Growth and UK Growth, all to be run by Cazenove's multi-manager team.
The products will be launched on 13 January after gaining FSA approval late last year.
The firm is working on a fourth product for the fund of funds range, a Cautious Managed sub-fund, which it expects to launch in the second quarter of 2003.
Phil Wagstaff, retail managing director at M&G, said: 'A number of intermediaries are looking for cautious vehicles at present, so many of them like the balanced fund, but some want something even more cautious with a higher fixed interest content.'
The funds of funds, which hold 12 to 17 portfolios each, have been pre-marketed to about 150 key accounts across the UK in November and December, and feedback has been very positive, said Wagstaff.
M&G is offering two share classes on each of the funds: an 'A' class, which has an initial charge of 4% and an annual charge of 1.5%; and an 'X' share with no initial fee and an annual charge of 2%, as well as a sliding scale of charges for investors who exit in the first five years.
As part of the launch marketing campaign, the initial charge on the 'A' class shares will be reduced to 3% until the end of the tax year on April 15.
M&G will pay 3% upfront commission and 0.5% renewal on both share classes, funding the 'X' share commission from its own balance sheet.
The firm is planning intermediary roadshows, running for two weeks from 8 January.
What made financial headlines over the weekend?
The chairman doggedly tries to be amusing
'Profitability is almost a myth'
Active Wealth in liquidation
Cautious welcome for volatility