Fund design

as individual as its investors

Overview

Individual investors don’t stay the same. Sometimes they need different things, and will move funds to get it. Sometimes, regulatory and market changes mean it’s time to develop new funds from scratch.

The Team

Rob Gardner
Patrick O’Sullivan
Pete Drewienkiewicz

Client AUM
£80bn

The Issue

How we helped

Individual investors don’t stay the same. Sometimes they need different things, and will move funds to get it. Sometimes, regulatory and market changes mean it’s time to develop new funds from scratch.

For a large UK wealth manager, we designed, developed and delivered a new fund to deliver to retail clients which used institutional tools to meet its goals in a new way.

Our client's problem

 

Our client is a large UK wealth manager with over £80 billion in funds under management. The client wanted a fund that delivered regular income, to fulfil its customers’ needs following the introduction of Freedom & Choice Legislation.

 

With fewer people now buying an annuity to take them through retirement, we worked with the client to define how it would approach building a new product that would generate sufficient income for its clients to live on, while maintaining a focus on keeping their capital stable.

 

Given the heavy presence of equity funds in the retail investor landscape, the client wanted to explore a fund that could achieve this objective using fixed income assets, without exposing investors to the significant interest rate risk typically associated with corporate bonds.

OUR APPROACH

We began with the end in mind

We worked with the client to set a clear set of objectives for the fund based both on client needs and gap analysis of the existing fund range.

We then designed the fund to meet these objectives and access the asset class and commercial ‘gaps’ identified. We used our proprietary risk processes – refined through our historic relationships with some of the largest institutional investors in the UK – to make sure that the blend of asset classes we wanted to use in the fund would achieve our objectives without exposing our client’s individual investors to unnecessary risks.

How we helped our client

To meet the investment objectives of the fund we needed to look further than the asset classes most often offered to UK retail savers – benchmark-focused equity and investment grade corporate bonds. The funds we designed brought asset class strategies normally only accessible to larger individual investors within the reach of retail savers. These include high yield emerging market corporate bonds, European subordinated financial bonds, and bonds issued by US mid-market corporations.

 

We carried out substantial risk modelling work on the new funds to make sure that the blend of strategies within each one was correct, and no one individual investment risk dominated.

 

We also performed specialised and highly technical manager research: both to find best in class managers in each asset class, and to ensure that their investment strategies could be translated into the demands of the fund’s legal structure without losing each manager’s competitive edge.

The Results

The result is a fund which is well-aligned to the needs of UK retail savers, and has performed well since inception. From a commercial perspective the fund has also proven very popular with the client’s end investors.

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