Marcel Bradshaw, formerly sales director at Old Mutual International, told International Adviser: “I’m a great believer in multi-asset and I think it has got long-term legs. Multi asset is not new, balanced fund has been around a long time.
“Most investors 10-20 years ago would’ve been better off investing in this approach vs doing their own asset allocation.
“Is this a trend or is this sustainable? I think multi-asset is here to stay and I’m quite surprised the UK adopted this approach only recently.
“Where I come from, in South Africa, this has been used since late 90s.”
Bradshaw feels that multi-asset investing will last but he raised some questions about current trends.
“I think where we are questioning that approach is around the new trend targeted volatility.” said Bradshaw. “We don’t believe in that approach, but time will tell.
“By targeting lower volatility, the manager ends up investing in more expensive companies whereas our approach to risk management is to invest in companies at a discount to the market which provides us with a margin of safety.
“However, this approach can result in higher volatility which we don’t see as the measure for risk.
“These volatility targeted funds are very popular at the moment, but only time will tell if it’s just a trend.”
Changing the landscape
These changes are not the only ones to hit the intermediary sector.
Bradshaw believes it has been going through “institutionalisation”, which presents itself in three major ways as regulation continues to “drive the UK intermediary sector”.
“The first and the most visible of these is vertical integration,” Bradshaw added. “Post the fact that platforms can’t accept rebate anymore, they had to change their strategy.
“Owning the full value chain was the only way for them to make these platforms profitable. They, therefore, had to own distribution, platform and the fund manufacturing side.
“An interesting fact is that, if you’re old enough , we’ve seen this vertical integration before in the 80s with big insurance sales forces dominating the landscape.
“So, even though we think it’s very new, regulation has actually driven us to the past.”
Bradshaw spoke about the how compliance and regulation have made it hard for IFAs to be independent – which is the second way in which institutionalisation presents itself in this sector.
He went on to say that most of them would have to be in a compliance network: “I cannot see one-to -five man firms handling compliance themselves.
“Finally, the last of the three is that financial advisers are outsourcing,” said Bradshaw. “IFAs are either outsourcing to multi-asset funds, creating their own model portfolio service or outsourcing externally to discretionary fund managers.
Smaller firms tend to outsource investments to multi-asset funds, he added. While bigger firms invest in their own model portfolio service, which has its own investment committee.
“Once they have about half a billion under management many of them choose to go the discretionary route.”