Following on from the launch of its passive MPS in August 2016, which after the recent launch of a global growth mandate now contain six portfolios, the group has launched another six portfolios, benchmarked against risk profiles 3 to 8 in Distribution Technology’s Dynamic Risk Planner risk ratings.
Ryan Hughes, head of fund selection at AJ Bell Investments, is in charge of picking funds for the portfolios, each of which will contain about 15 underlying active funds.
Each portfolio carries an annual management charge (AMC) of 0.15%, with the ongoing charges figure (OCF) ranging from 0.39% for level 3 to 0.84% for level 8. This gives a total cost for the portfolios ranging from 0.57% to 1.02%.
While the funds predominately hold active funds, Hughes and his team can select passive funds and at launch they have selected the Fidelity US Index fund for its core US large cap exposure across the six portfolios. It has also selected an exchange traded fund, the Lyxor FTSE Actuaries UK Gilts 0-5yr ETF, for its UK gilt exposure in the lower risk mandates.
In portfolios 5 and above, Hughes has selected the Dodge & Cox US Stock fund for exposure to the US, while in the UK he holds the Troy Trojan Income and Man GLG Undervalued Assets fund across all six mandates.
Elsewhere in the UK, Hughes has opted to include the Investec UK Alpha fund in portfolios 5 and above, while in the highest risk portfolio 8 he also has a 3% weighing in the Old Mutual UK Smaller Companies fund.
Commenting on the launch, Hughes said: “In recent years, the polarising debate around active vs passive has been high on investors’ agenda. However, in talking to advisers, it remains clear that not all advisers want passive only solutions, they also want an active choice.”
“The portfolios are strategically long-term and are well diversified across both asset classes and regions. While focused on finding the best active managers, we will only use them when we see genuine evidence of skill and if we can’t we will happily use passive options. This flexible approach is key in ensuring that we are not wasting our investor’s money on fee’s that are not justified and that we give ourselves the best possible opportunity of delivering good positive outcomes for our customers. ”
In the closest to what would be considered its balanced offering, portfolio 5, the fund had 57% in equities, 33% in cash, 8% in alternatives and 2% in cash. Within equities, 21% is in the UK, 10% in the US, 7% in Japan, 6% in emerging markets, 4% in Pacific ex Japan and 3% in Europe. The fund has also has 5% wighting in technology with the Polar Capital Technology fund.
Within fixed income 14% is in UK corporate bonds, 7% is in UK gilts, 5% is in global high yield and global emerging debt and 3% is held in international bonds. Elsewhere 8% is in absolute return funds (Janus Henderson UK Absolute Return and M&G Absolute Return Bond).
Kevin Doran, chief investment officer and managing director of AJ Bell Investments, added: “Our passive MPS is becoming increasingly popular with advisers, particularly following the price cut we implemented earlier this month. Many of these advisers we work with have asked if we can add an active management option and so, thanks to our commitment to offer investors choice, we are delighted to be able to do that to meet this demand.
“Advisers will now have access to managed portfolios matched to six risk levels, with an active and passive option in each level. This will enable them to meet the vast majority of their clients’ risk profiles, investment preferences, all at a market leading price point.”
