Multi-manager distribution, the problems of following a benchmark too closely and government training for advisers are the topics of the day
I have just caught up with the coverage (IW 21 July, p3) of the recent Scottish Widows fund closures and would like to correct an error. Although I would normally be first to turn a blind eye to an innocent mathematical error, I could not keep quiet on this occasion, especially as the way this caused the story to be covered may have left your readers with the impression Scottish Widows is less than committed to maintaining and developing its external range of funds.
The source of the problem, as with so many multi-manager issues, appears to be a spot of double counting.
Although 27 funds were closed in total, only 14 of these were pension links. As Scottish Widows had 58 pension funds, the proportion of funds closed was nowhere near the amount claimed.
What seems to have happened is that the total life and pension closures were compared to the number of pension funds. Hence the confusion.
Although the coverage pointed out the closures occurred due to poor demand, it made no comment on the high demand for the overall Scottish Widows multi-manager offering.
This has been incredibly strong and is probably the biggest success story at Scottish Widows in recent years.
The launch of the external fund links has been the main driver of Scottish Widows' recent recovery in the IFA market, which saw sales grow by 35% in 2001 ' the external links were launched in November 2001 ' and by a further 37% during the first six months of this year.
Furthermore, the current value of the external links now exceeds £500m ' £850m if you include the Frank Russell links ' while the funds that are closing had a total value of just £5m. This means the closures impact less than 1% of the funds under management.
Finally, closures of external fund links are not a new phenomenon in the unit-linked multi-manager world. It makes no sense in a low margin and price sensitive market to maintain funds that aren't used as the cost of administering them is not insignificant. Having said that, the trick is to make sure the fund range evolves to meet IFA and consumer demand.
Scottish Widows is committed to doing this, so your readers can expect to see further developments in the future.
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