Most traditional investment funds major on one sort of asset. They're equity funds, bond funds or property funds.
While they may mix in a small percentage of other assets – to shore up the fund’s liquidity for example – they are largely at the mercy of the prevailing mood in that major asset’s market. If the stock market falls, so does the performance of your equity fund. With a single asset fund, even the sharpest fund manager can’t avoid an overall dip in the market.
That’s why many advisers advocate diversity for their clients. Invest in a range of funds that cover-off the major asset classes and your overall investment is less affected by a fall in any one market. This is a common sense approach, but if a dip in the market becomes a collapse, your client’s investment will still be severely affected if they don’t move money out of that poorly-performing asset class in good time. Plus investing in a range of individual funds can be expensive.
An increasingly popular alternative is to use a Multi-Manager fund. Whether manager-of-manager or fund-of-fund in makeup, investors don’t have to actively make decisions about defensively moving money out of one asset into another – the management team of the Multi-Manager fund can do that for them.
This sounds great. But some Multi-Manager funds are constrained by their standard asset allocation model, so the fund management team may not be able to move quickly enough to limit damage to your client’s investment.
The solution lies in thinking about what’s important to your client. They want to know where their money is going and they want an idea of what their potential return will be (although future investment performance cannot be guaranteed).
That’s the approach the Prudential takes with all 6 of its ‘Core Fund’ range. Each is designed to become a core holding in the portfolio of most investors.
The core funds are managed by the Prudential’s Portfolio Management Group (PMG) who act as in-house manager-of-managers, co-ordinating 300 investment professionals worldwide, who collectively control £120bn in funds under management.
The PMG ignore standard asset allocation models in favour of a dynamic approach, making active asset decisions whenever they see opportunity arise. They don’t focus on a single asset, but invest across the board in equities, bonds, property and cash – both in the UK and Globally. They aim to enhance growth while reducing volatility.
The range of Core Funds does not reference a sector average asset allocation when deciding where to invest, unlike many other funds in the sector. This means that PMG are not chasing an arbitrary asset allocation set by competitors, but investing where they think the best value is at any given time whilst also staying within sector minimum and maximum holdings.
This approach has worked in the past. The PMG was one of the first to spot that the downturn in equity markets of the early 90s was a long-term trend. They quickly moved significant investments out of equities and limited their loss.
To find out more about Prudential’s Core Funds or the Prudential PMG, visit www.pruadviser.co.uk/funds
Prudential is a trading name of the Prudential Assurance Company Limited and Prudential Unit Trusts Limited.
This name is also used by other companies within the Prudential Group, which between them provide a range of financial products including life assurance, pensions, savings and investment products. The Prudential Assurance Company and Prudential Unit Trusts Limited are registered in England and Wales under number 15454 and 1796126. Registered Office at Laurence Pountney Hill, London EC4R 0HH. Authorised and regulated by the Financial Services Authority.
