A newly launched DFM is claiming to offer a “genuinely differentiated” proposition by focusing solely on investment trusts and ETFs.
Founded by City analyst Chris Grant and Investors’ Chronicle columnist John Baron with help from ex-professional cricketer Tom Poyton, Baron & Grant Investment Management will specialise in financial planning, advice and discretionary investment management.
The firm received Financial Conduct Authority (FCA) authorisation in January 2021 and after a “soft launch” in the first half of the year has attracted £30m ($41.7m, €35m) in assets under management.
Baron & Grant touts its business as “genuinely different” due its focus on investment trusts, which the founders believe have been overlooked by other DFMs despite delivering “excellent long-term returns for over 150 years”.
Chief executive Grant said: “We simply don’t buy into the impediments that are often cited by other investment managers for not using investment trusts. Our research confirms we can build portfolios of a sufficient scale and diversity to satisfy our clients.”
The DFM offers a range of 13 model portfolios spanning the full spectrum of risk-adjusted returns including six capital growth portfolios, four income-orientated portfolios, as well as green, Isa/Jisa and best ideas portfolios.
The portfolios are comprised of 61 investment trusts and are complemented by 25 “carefully selected” ETFs.
Baron, chair of the investment committee, added: “We are focusing on investment trusts because of their superior performance relative to both unit trusts and the indices. Clients are already benefiting, and we now look forward to the next phase of the company’s development.”
‘Using trusts is definitely different’
Asked about Baron & Grant’s proposition Ben Yearsley, director at Fairview Investing, said: “Using trusts is definitely different, however I would rather have had an approach that uses the best of open and closed-end”.
He continued: “The major question would be how will they cope with liquidity issues as they grow in size? Or is their investment universe limited to the biggest trusts from the launch of their service?”
In the crowded MPS marketplace, differentiation is key as model portfolios are “quickly becoming commoditised products,” he added.
This is especially true now that a number of asset managers, including LGIM and Schroders, have launched low cost model portfolio services of their own to lure advisers away from DFMs.
Baron & Grant’s MPS will have a discretionary investment management fee of 1% per annum, with annual platform charges of between 0.06% and 0.25% as well as an ongoing charges figure of between 0.68% and 1.17% depending on the portfolio.
Other investment trust-focused model portfolios exist
But, it is not the only DFM to launch model portfolios focused on investment trusts.
Last November, Binary Capital rolled out its own MPS range that exclusively uses investment trusts for equity exposure. Its range includes five portfolios with each of the portfolios holding nine investment trusts, while corporate bonds, gold and property are accessed via ETFs.
While DFMs have been warming to trusts to gain access to less liquid areas of the market, closed-ended funds are still largely underrepresented in model portfolios due to the fact they are still not offered on many trading platforms. Liquidity can also be a problem for large MPS ranges running billions of pounds.
Smith & Williamson and Crossing Point are among a small handful of wealth managers that use trusts in their MPS.
Baron & Grant is headed by Grant who was previously head of European equity research at ABN AMRO Bank. He has also held roles at Deutsche Bank and Barclays de Zoete Wedd.
Investment committee chair Baron produces a monthly column for the Financial Times-owned Investors’ Chronicle and has previously worked as director of Henderson Private Clients. He also worked for Rothschild Asset Management where he was responsible for the core UK equity portfolio.
The DFM’s executive director Poynton played professional cricket for ten years at Derbyshire County Cricket Club before retraining in financial planning, advice and investment management.
Baron & Grant will also include a financial planning and advice arm led by Mark Johnson, who previously spent seven years as a managing director at Integritas Financial Planners.
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