Coombs is head of multi-asset investments at Rathbone Unit Trust Management and already runs the Total Return and Strategic Growth portfolios.
He described this range as being “fairly complete” given the existing funds are risk-rated by Distribution Technology, out of between one and ten, as a three and a five; it cannot rate the new fund until it is live, but using the Distribution Technology methodology, it would be closer to seven.
Fund facts
The Rathbone Enhanced Growth portfolio seeks to provide, on average, 2% above the returns from a combination of 70% MSCI World Index and 30% MSCI Emerging Markets index over the long term, with a volatility targeted to be 100% of equity volatility.
Coombs stressed that the fund is not benchmark-driven and will have the following ranges:
- * 0% to 10% in liquidity assets;
- * 70% to 100% in beta assets;
- * 0% to 20% in alternatives.
Coombs explains: “The maximum equity content is 30% so the beta allocation will only include a maximum 30% in equities. The other 40% could be in private equity, credit, property REITs etc.
“For alternatives we will probably have a 10% structural allocation to CTAs and possibly a CDO equity fund and/or a catastrophe insurance fund. We are looking at non-correlated assets for a higher risk fund. It will have a high tracking error and is most definitely not an absolute return fund.”
Emerging focus
In principle, it will use the same top-down investment process as across the other multi-asset portfolios with macro-economic analysis providing the risk profile of each followed by a tactical asset allocation bearing in mind liquidity (cash, government bonds and high quality credit), beta (corporate bonds, equity funds, commodities and REITs) and the use of alternatives (commodities, hedge funds, physical property and private equity).
It has no specific yield target and its aim is to target a return over a minimum of five years, but ideally over ten years and above.
Explaining the choice of benchmark, Coombs says: “We believe that in ten years’ time, the weighting to emerging markets in the MSCI World Index will more closely match their share of global GDP than current stock market capitalisations. The International Monetary Fund is forecasting that emerging markets share of GDP could be as much as 51% by 2013.”
The funds are then chosen using specific quantitative and qualitative criteria.
The new proposition targets defined return objectives within defined levels of volatility and is aimed at higher-risk investors with a long-term time horizon.
