The trust’s adviser, Willis Tower Watson, has already compiled models of the fund’s five portfolios to see what it would look like in practice.
Godfrey said the result “looked really nicely uncorrelated” and had a very high ‘active share’ of around 95%, indicating the trust would not risk being a closet tracker.
Interestingly, Godfrey only intends to rebalance the portfolio if extreme circumstances arise that jeopardises shareholders’ interests.
“It’s a simple asset allocation approach,” said Lowcock, reflecting on Godfrey’s proposals.
“On the one hand, it is easy to communicate to investors. But on the other, asset allocation is one of the biggest drivers of investment returns.
“If you have one out of five portfolios that invests exclusively in Asia, for instance, and Asian markets get really expensive, then at some point performance will cause you to need to rebalance.
And “rebalancing is a good way of managing risk”, he adds.
“Otherwise the fund could get out of shape and get away from the original mandate.”
On whether he would be lining up to buy Godfrey’s trust, Lowcock intends to take a wait and see approach, though he welcomes the long-term concept of the mandate.
