rlam passive funds a pleasant surprise

RLAM's new move into passive equity management is nothing of the sort having run quants strategies for more than a decade.

rlam passive funds a pleasant surprise


In the retail world, RLAM is better known as a fixed income house rather than an equity manager, active rather than passive, and UK rather than international. So how many of you knew that RLAM had a passive fund range available across UK and US indices?

How many of you knew that it holds pushing £10bn in passive assets under management?

I would wager that the answer is a minority, but this is a deliberate strategy by a quants team that is well-established, running for just over a decade, and extremely well thought of.

Well-kept secret

It is only in the past couple of years that RLAM has opened its multi-billion pound passive funds to private client asset managers and they are still not available to mass market IFAs.

They do not actively market the funds; they are not available on any of the platforms; they do not want to take on the administration – and therefore extra cost – of promoting them to ISA investors.

So why should investors look any closer?

There is their experience.

Alongside these new Japan and Far East funds, RLAM currently manages UK All Share (£500m AUM), FTSE 350 (£5bn) and US (FTSE World US) Tracker (£1.6bn) funds with the bulk of the money coming from its Royal London life company parent.

The way they run the money is by trading and quantitative research, using the might of the trading desk behind them for efficiencies that others do not have access to. Vicky Harriss, who runs the two UK trackers, has no scope whatsoever to be active in the fund and has to explain any under or out-performance of +/- 10 basis points.

There is the cost.

The RLAM FTSE 350 Tracker has an AMC of 10bps; as does its All Share Tracker, contributing to a TER of 12bps; its US Index Tracker has an AMC of 20bps.

These charges are lower than many ETFs provided by even the giants and usual go-to managers of low cost passives: such as iShares, Vanguard, ETF Securities and the like.

Appeal of the crowd

And then there is the opinion of those who have already taken a closer look.

Caroline Shaw is a fund manager at Courtiers who has taken a position in the FTSE 350 Tracker for a combination of the reasons above.

She is a fan of Vicky Harriss and the team, the way they use index futures for liquidity, the accuracy of their tracking and the low cost they manage to do it all at.

Following a meeting 12 months ago to discuss the UK trackers, Shaw concluded: “These funds compete directly with the ETF market and may be even more competitive. Should we wish to take FTSE 100 exposure, we could consider this product.”

Subsequently, she did, so she did.

It is going to be harder to run Far Eastern money on exactly the same basis given the relative liquidity available, currency issues and need (possibly) to hedge. RLAM may have to consider what to track as the current Far East Fund has the FTSE AW Asia Pacific ex. Japan, India & Pakistan Sterling Index as its benchmark.

All said and done, RLAM’s passive propositions may just be a hidden gem so why not have a closer look for yourself?

Have you already done due diligence on RLAM’s passive range? Tell everyone else what you think below…