Defaqto, in association with Prudential, has launched a guide to help advisers rate and select 'risk-bound' multi-asset funds, which particularly emphasises the importance of due diligence in this area.
In recent years, Defaqto said, market volatility has prompted a shift in investors' primary focus from return to risk, which has led to an increase in the popularity of risk-bound funds.
These risk-focused investments typically exist as 'families' of four or five multi-asset portfolios run by the same investment management team - following the same investment process, but with expected return and risk parameters for each fund changing through the range.
The guide is accredited by the Chartered Insurance Institute/Personal Finance Society and the Chartered Institute for Securities and Investments for up to 60 minutes of structured CPD.
It is designed to help advisers:
- Identify the different ways in which the multi-asset fund universe can be broken down.
- Understand what risk-bound multi-asset funds are, how they work, how they can be used and how their sub-set 'risk- targeted' market has grown over the last few years.
- Understand how risk-bound funds can be rated from both a quality and suitability point of view.
- Understand the benefits of risk-bound funds to both advisers and their clients.
Defaqto head of insight for funds and discretionary fund management Pan Andreas said: "For the investor, the benefit of these types of funds is their simplicity, as it is possible for a client to invest in the same family of funds throughout their investment lifecycle.
"There can be significant differences, however, in structure, process and other features across the various risk-bound fund families in the market, so due diligence is still very important - such funds need to be monitored to ensure they are meeting their client's aims and objectives on an ongoing basis, as with any other fund."
He added: "We designed this guide to help advisers identify the factors to consider in their advice process and how to mitigate some of the issues and risks involved."
Click here to read the full guide.
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