Interactive Investor (II) has launched its preferred funds list called Super 60 which commentators believe sees the platform provider better compete with the likes of Hargreaves Lansdown’s Wealth 150 list.
The buy list includes a range of investment funds, trusts and exchange traded funds, selected by the firm’s investment committee.
It includes both active and passive funds across all the major markets and asset types, including low cost, core, income, smaller cap and adventurous options.
II said some other rated lists concentrate purely on funds and fail to consider the investor base, which may prefer investment trusts and ETFs.
The platform provider said its Super 60 list “addresses this imbalance” by deliberately looking at the full collective investment universe, choosing the best in class for each sector, although this may mean that some categories will favour one asset type over another.
Tim Burrows, research and analytics manager at Fundscape, said the II list is different from most because it includes both active and passive, as well as funds, investment trusts and ETFs in one, whereas most providers have separate lists.
II head of personal finance, Moira O’Neill, explained that it is designed to offer a filtered selection appropriate for all investors, whether they are new to investing or experienced.
“Our objective is to provide a menu of high-quality investment choices across a broad variety of markets and investment types.”
Ambitions to compete
Clive Waller, managing director at CWC Research, said the list has been compiled because “II have ambitions to compete with Hargreaves Lansdown and some form of buy list is crucial”.
But O’Neill said II began the process many months ago, prior to the Alliance Trust Savings acquisition announcement. “We are now the UK’s second-largest direct D2C platform and the number one flat fee platform – so we already compete with Hargreaves Lansdown and others. This isn’t the first time that Interactive Investor has had a select list of recommended investments.
“Prior to the TDDI integration, we had a list of 260 rated investments that was suited to our sophisticated and smaller customer base. However, we decided to create a more streamlined list to suit the merged business with a broader customer base.”
Limiting choice
Meanwhile, Heather Hopkins, founder of Nextwealth, said buy lists have proven to be useful tools for investors and important influencers of fund flows.
“We estimate that over one third of gross sales on Hargreaves Lansdown go to funds on their Wealth 150 list,” she said.
“We think that buy lists can be good for investors. Investors tend to want to make a choice within a limited range of curated funds.”
She explained that this goes back to Barry Schwartz’s theory in the Paradox of Choice. “In his 2004 book, he argued that limiting choice can reduce anxiety for shoppers. His research relates to supermarkets but the principle applies.
“Reducing choice can make it easier for us to choose and reduces anxiety. Most investors are not expert investors and so curating a list based on a rigorous approach, as II appear to have, will make it easier for investors to choose funds.”
Methodology
The Super 60 has a selection process which features seven key elements, all overseen by II’s investor committee. It begins with an initial screening of the entire collective investment universe, followed by an overall assessment to ensure the funds and trusts that have been identified offer good value for money for investors.
The performance of the funds and trusts is then analysed, along with risk profiling and once this process is completed, the findings are discussed among II’s analysts and experts to see what can be included in the Super 60.
This process is repeated once every year using a ‘clean sheet’ approach which means any new fund offerings and significant market events are also covered. It is also monitored on an ongoing basis for any red flags, such as fund manager changes, under performance or, for investment trusts, trading at a persistent premium, and there is a full review by the committee on a quarterly basis to discuss changes.
Richard Wilson, CEO of II, said: “In a crowded investment universe which can be difficult to navigate, this list represents what we consider to be the best in class and comes with a steer on how these funds might fit into a portfolio.”
Burrows added: “It will be interesting to see what interactive investor do with the advised side of Alliance Trust as the existing business is solely focused on the D2C platform market.
“Will they offload the advised part or does this mark the start of a move into the advised platform market?”
