The Momentum Factor Series, which launched on 5 November 2012, comprises three funds and is overseen by lead portfolio manager James Klempster. The funds target risk profiles three, four and four as determined by Distribution Technology.
Over the medium to long term, the Momentum Factor 3 aims to deliver CPI inflation plus 3%, Momentum Factor 4 targets 4% above inflation and Momentum Factor 5 looks for 5% above inflation. They combine dynamic asset allocation with the use of third party managers and strategies to meet these aims.
Klempster said: “We take the view very much that inflation is a big deal for investors and one that they perhaps don’t take adequate concern of today. We think people might not be worried enough about inflation while being too risk averse in their portfolios in general.”
The manager also claimed the Factor Series is unique in combining risk-profiled investing and outcomes-based investing. “We think this is a tailor-made solution for the UK wealth and IFA market,” he added.
In terms of asset allocation, the funds launched with low weightings in government bonds as Klempster considers them to be relatively expensive.
The lower-risk portfolios hold some inflation-linked government bonds while the range is active in other areas of the fixed-income market such as investment grade, high yield, convertible debt and strategic bond managers like Old Mutual’s Stewart Cowley and Jupiter’s Ariel Bezalel.
In the equity space, the funds are slightly overweight their long-term baseline scenario on the view that stock markets are at attractive valuations when compared with history. Infrastructure funds are a theme in all the portfolios, owing to the steady cash flow, pricing power and inflation protection that the sector can offer.
“We have a dedicated team of analysts who scour the universe for the best available fund managers in their particular niche,” Klempster said.
“We look for a long list of different characteristics, not just track record. We look at the fundamental elements of that track record and why it exists. That gives us an insight into what the managers have done historically and if they can repeat it in the future.”
All of Momentum’s Factor funds also hold a small position in a gold through an exchange-traded fund, which is essentially a diversifying position and an inflation hedge.
The Momentum Factor Series has a minimum investment of £1,000 with management fees of 0.5%.
