What irks northern wealth managers about fund groups

Is access to fund groups adequate if you are based outside of London?

Wealth managers in the north of England and Scotland are generally satisfied with the access they have to UK fund groups, but find them lacking on disclosure and ease of access to fund information on websites.

Ahead of its Northern Congress event in June, Portfolio Adviser quizzed a handful of wealth groups from Northumberland, Lancashire and Edinburgh, all with more than 200 clients and in excess of £100m under management. They were asked about their access to fund groups and how their portfolios are positioned for this stage in the cycle.

Most of them rated access to fund groups as “generally good”, although Paul Williams, research director at Liverpool-based investment manager and stockbroker Blankstone Sington, notes that access “varies between groups from very good to poor”.

When asked what could be better when it comes to access, Williams says he has difficulty with some managers being reluctant to leave London and Edinburgh.

For Matthew Worton, portfolio manager in Brewin Dolphin’s Newcastle office, it is not so much the lack of face-to-face time, but inadequate access to fund literature and contacts on fund groups’ websites.

“[I’d like] financial professional portals where I could find and contact the relevant representative without having to enter a rabbit warren of websites and telephone links,” he says.

But Harrogate-based Iboss Asset Management and Edinburgh wealth group Cornelian Asset Managers both speak very highly of the availability of the fund groups they are invested with.

Chris Metcalfe, investment director at Iboss, says his firm’s access to groups and fund managers is “excellent” conducted either through face-to-face meetings or conference/ video calls.

“The fact we’re based in Harrogate removes us from the noise of the City and allows us to be more targeted in our approach to meetings,” he says. “In effect, we get the best of both worlds: great manager access but then a quieter environment in which to consider our investment decisions.”

Similarly, Richard Stark, senior investment manager at Cornelian, says face-to-face access is “generally good”.

He adds: “We have excellent access to UK asset management groups and the key fund managers running the strategies in which we are invested or would like to invest.”

Full disclosure welcomed

Portfolio Adviser also asked what irks northern wealth managers about the industry.

Stark says fund management groups are on occasion unwilling to provide full disclosure of underlying holdings to investors.

“This can be unhelpful when trying to fully assess an investment strategy,” he adds. “In addition, published fact sheets for actively managed funds often do not provide commentary as to the specific drivers of over/underperformance in any given month.

“Enhancements in this regard would be a welcome improvement.”

Stark also says standard requests for proposal provided by fund groups can vary in terms of length and quality.

“We feel a better solution to assist fund buyers would be the provision of a centralised and actively maintained database of frequently asked questions,” he adds.

The thing Metcalfe gets most annoyed by is simply “the image of the industry as seen by the wider public”, while Worton finds the short-term mentality from certain parts of the industry most frustrating.

On the defensive

When it comes to portfolio positioning in the current stage of the cycle, the common mindset is one of diversification and defence with some risk thrown in for good measure.

Ben Roberts, investment management director at Tilney in Manchester, has a low weighting to high-yield bonds and alternatives “feature quite heavily”. Williams is similarly slightly overweight equities.

Worton says: “We hold predominantly overseas exposed UK companies with limited UK-centric exposure. In terms of overseas equities, we are steering away from overtly cyclical companies in favour of defensive, growth compounders.”

Stark is also constructive regarding the medium-term outlook for equities and corporate bonds, despite the muted outlook for global economic growth and elevated political uncertainty.

“Our portfolios are exposed to a number of assets classes which can provide downside protection and potentially benefit from an increased level of market volatility, including convertible bonds, hedge funds and gold,” he says.

“Our UK equities portfolio is well balanced between both defensive and cyclical businesses and remains well diversified by sector. Given ongoing Brexit uncertainty, we have hedged approximately one-third of our overseas equity exposure back to sterling, given the risk of material sterling strength in the event a hard Brexit outcome is avoided.”

Metcalfe says he has resisted the temptation, unlike many fund selectors and managers, of piling into a specific range of assets that he believes have eschewed the wider investable universe in a momentum-driven market rally.

He says: “We have spoken previously about the considerable biases inherent in markets currently. We remain fully diversified and relatively defensively positioned, which means resisting the allure, for example, of an ever-increasing US equity position. This is a position that, in Q4 of last year, demonstrated just how precarious things are.”

PA Northern Congress takes place on 6-7 June at Rockliffe Hall Hotel, County Durham

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