It has been over one year since the launch of our True Potential Wealth Strategy Funds. We now manage 21 funds with over £1.6bn in assets, and this sum is growing rapidly.

Close Brothers, Schroders and SEI were our first appointees as sub investment managers, helping us launch our first set of funds in March 2015. Those eight funds were followed by several successful fund launches with 7IM and Columbia Threadneedle. We’ve also recently launched three funds with Allianz on the 19th May this year.

We intend to expand the Wealth Strategy Fund Range through the addition of two renowned names in Global Finance – Goldman Sachs and UBS – both partnering with us to launch a further 7 funds.

From the Start

When we first promoted the True Potential Wealth Strategy Fund Range, a small number of advisers expressed uncertainty about what this would deliver for investors and one year on, we take stock to reflect on what has happened in actual terms versus the concerns that were being expressed to us at the very beginning of the process. In our experience, the best way to address any concern is to work hard to deliver what was first promised.

Below we revisit some of the points raised, our actions to date and what we believe we have achieved to alleviate those concerns;

1. Ensure sub managers are directly responsible for fund management.

From the beginning we have made sure that our fund manager partners are best placed, day to day, to manage the underlying assets in each fund. Fund management is a core skill which they possess in abundance and we haven’t attempted to change or dilute any investment decisions taken by them. We add value by holding all seven of our appointed managers to account, making sure their investment actions remain consistent with the fund objectives

Our true purpose is to ensure clients get the best deal possible using our scale to negotiate lower fund prices, with this helping deliver better fund performance over the long term in order to meet each client’s investment goals. While our journey has been successful to date, it is far from over and there is still a lot to work towards in order to bring an array of further benefits.

2. Ensure fund performance relative to old funds remains consistent and improves over time.

Some advisers were concerned that our funds would be treated as old style ‘mirror funds’, performing poorly compared to the managers’ own funds. However, this hasn’t happened as we insisted on making our funds cheaper and having the professional oversight of a very strong Investment Committee that focused on the managers and their actions. We believe this will ensure that performance is continually delivered in line with the funds’ objectives.

The reason for the differences between our new Wealth Strategy Funds and already existing funds is largely due to us using a Valuation Point (VP) of 5pm for the funds, whilst the other fund providers use midday pricing.

We use a VP of 5pm to give you more time to invest during the day, which is what many advisers asked for. Therefore, the comparative daily changes in prices of our Wealth Strategy Fund Range are highly correlated to the managers’ own funds.  Variations reflect the extent to which the funds are exposed to market movements between midday and 5pm. In effect they are as aligned as we had expected.

3. Construct a strong and credible Investment Committee with the capacity to challenge Investment Managers on key issues.

The first year of the Investment Committee has certainly been an active one. All of the True Potential Wealth Strategy Fund managers have been interviewed and assessed and our funds managed by them have been consistently and regularly risk mapped to their respective risk categories.

Since the very beginning, the Committee have professionally tackled the managers head on, examples of this are questioning the risk mapping of the SEI Core Fund (True Potential Cautious Fund managed by SEI) and then the risk category mapping of the Columbia Threadneedle Monthly Extra Income Fund; now launched as True Potential Monthly Income Fund managed by Threadneedle.

As a result of their challenges, the True Potential Cautious Fund managed by SEI now includes a lower volatility equity product to ensure the risk rating is cautious, whereas previously it was showing a measure of future expected volatility equal to a balanced fund. The lower volatility equity product has reduced risk while keeping the same underlying asset allocation. Over the six months to the end of April 2016, this alteration has registered a positive effect with SEI Core posting a return of 2.43%, whereas the True Potential SEI Cautious Fund is nearly 1% ahead, posting a return of 3.42%.

The situation above highlights the influence and control we have over our funds and how we use this position in the best interests of clients. Previously if we had asked a manager to reduce the volatility of a fund they would have to consider the effect on all investors, not just investors on our platform, and they would not have made any changes. Now changes are made when required.

Finally, both Columbia Threadneedle and our own Monthly Extra Income Fund are now mapped to growth rather than balanced. This comes as the 80% exposure to equities within the fund creates the possibility for higher volatility in the future (we would add that the manager does a wonderful job controlling volatility through skilled stock selection).

Next Steps

Looking back, we are convinced that our approach is the right one for advisers and clients and the results prove this to be the case.

Moving forward, what are the key advantages of using the True Potential Wealth Strategy Fund range that you should now be considering: –

Managed Portfolio Series is our discretionary fund management portfolio proposition built on top of our True Potential Wealth Strategy Range. A key differentiation aspect for our Managed Portfolio Series is that access to all of the underlying investments allows us to model our fund selections accurately, attaining the right risk blend to deliver a credible proposition. We are no longer reliant on published fund fact sheets or 3rd party data vendors where the data can be as much as three months out of date, and inaccurate to boot.

  • Oversight from our True Potential Investment Committee, we are immensely proud to have a group of highly experienced individuals evaluating the True Potential Wealth Strategy Fund Range. It is their task to ensure the managers stay on track. By doing their job, clients will receive what they signed up for and we now have evidence to back our claim that the Investment Committee will be vocal and active on behalf of investors.
  • Cost is always at the forefront of our minds, through scale we have been able to reduce the cost of investing for clients and will continue to do so. It is not just the reduction in ongoing charges at fund level, our pension and Managed Portfolio Series do not carry any additional fee. This makes a huge difference to long term investment returns for clients where costs can severely eat into returns.
  • Evolution is important because if you stand still, you get overtaken. We are constantly evolving our fund range. We are currently working on a new low-cost fund range with a variable fee which compensates clients for negative performance and rewards the manager (and the client) for goal beating performance. The variable fee is symmetrical and rewards in equal measure (more about this later). The investment in us by FTV Capital is another important step forward for us and all our stakeholders. FTV are just as determined as we are to leverage scale and technology to benefit clients and to build a world-class capability. Their network of contacts is wide ranging in the ‘Fintech’ world and this is something we can expect to benefit from in future.
  • Exclusivity means working with you and your clients so that the funds are exclusive to advisers using our platform. This has always been a key aim.

Your capital is at risk. Investments can fluctuate in value and you may not get back the amount you invest. Past performance is not a guide to future performance. Tax rules can change at any time.

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