I was writing last year in response to Defaqto’s call for discretionaries to offer sufficient investment flexibility and to “stand out” to advisers in the run up to 2013.
Encouraged to hear then that Rowan Dartington has claimed to have created a “new market-leading investment process” called 4D. How you can actually be market-leading with something that is brand new is beyond me, but it does sound like the Bristol-based firm is at least trying something different.
The key distinction compared with traditional asset allocation approach is to focus on security risk rather than asset class risk. Equities, bonds and funds, we’re told, will be characterised separately with consideration of the different variables within each asset class, such as liquidity and volatility. The 4D part comes in monitoring portfolios in four dimensions – security risk, portfolio risk, asset allocation and geographical positioning.
It’s difficult to spell out exactly how this will work in practice, though all eyes will be on how the firm plans to apply this mixture of “a competitive management charge, institutional fund units and direct equity investment to deliver a low overall total expense ratio (TER)”.
How low exactly this TER will be Rowan Dartington isn’t saying, but the promise is that the new approach will bring the business right up to speed with being fully RDR-ready.
It was also interesting to hear this week of a new entry in the discretionary space with a proposition from Close Brothers Asset Management headed up by Close Special Situations Fund manager Deryck Noble-Nesbitt.
It is rare to see such a renowned fund manager take steps in this direction and probably quite brave given the high quality of investors already working in that space. He can’t be a man short of self confidence, yet who would deny there is still opportunity for new success in this space providing the bods at Close have their thinking caps on and can find the right balance between innovation and sensible pricing.
It’s become quite the thing to talk about RDR in terms of predicting who will be the winners and losers, but it’s those who stay static who will end up most at threat from the changes.