Bringing you choice - active and passive, not active or passive
For too long the investment industry has been stuck in a polarising debate about whether it is active or passive investing that should win out. In more recent years, the passive advocates’ voices have been heard loud and clear but this of course misses the point that there remains a number of hugely talented fund managers who have managed to beat the market, some by a significant margin, over time. The key, of course, is being able to find them.
At AJ Bell, we are agnostic in this debate and believe that it is important to give advisers the choice of both active and passive solutions. Having launched our Passive MPS in August 2016, we are pleased to have now launched our Active MPS range, encompassing six growth solutions and two income solutions.
While this is a new launch for AJ Bell, the team involved in managing the portfolios has a huge amount of experience in identifying, researching, selecting and monitoring fund managers. This experience has been put to good use on the construction of the new Active MPS but importantly, we are acutely aware of how hard it is to find fund managers who can consistently deliver outperformance. As a result, the Active MPS will only ever use actively managed solutions when we judge that they have the potential to deliver performance worth paying for. With such a focus on the cost of investing, we share this ethos to ensure that the maximum amount possible of our investors’ hard-earned money is put to work, rather than being spent on unnecessary costs.
Putting this into practice, we have two areas of our growth portfolios at launch where we have judged that a passive solution is the best option. This is in our UK gilt exposure, currently solely exposed to short duration gilts, where the efficiency of the market is such that the additional cost of active managers far outweighs the benefit. The second area is with our US large cap exposure, which is a notoriously difficult area to outperform – choosing a passive solution here allowed us to use more expensive higher alpha managers elsewhere.
In other areas of the portfolio we have identified a wide variety of fund managers who we have a high level of conviction in. Within our fixed interest exposure, we see the experience and stability of Ian Spreadbury at Fidelity combined with the pragmatism of Chris Bowie at TwentyFour Asset Management as an ideal blend, particularly given the potential challenges facing the economy and fixed interest markets. In European equities, the stock picking prowess of Richard Pease at Crux is attractive as the European economy picks up momentum, while in Asia the pragmatic approach of Will Lam at Invesco Perpetual gives flexibility to find the very best stock ideas across one of the world’s fastest-growing regions. In Japan, we have identified the huge experience of Stephen Harker at Man GLG as a great way to gain exposure to value stocks in Japan that have been left behind in the growth-focused rally of the last few years.
In the UK, the economy continues to face challenges in the run-up to the departure from the EU. As a result, we have looked to blend high quality managers who operate in different areas of the market. The core approach of Simon Brazier at Investec combines well with the more aggressive, higher turnover style of Henry Dixon at Man GLG and the more defensive approach of Francis Brooke, manager of Troy Trojan Income.
Looking at the newly launched Active Income MPS, each portfolio targets a long-term yield of 4% per annum. With differing levels of risk and equity content, there is choice for advisers in how to generate income over time. Portfolio construction here is focused towards income and therefore the portfolios are a blend of active and passive strategies. There is still a place for high quality active managers such as Jacob de Tusch Lec, manager of Artemis Global Income, Jason Pidcock, manager of Jupiter Asian Income and Charles Montanaro who runs the Montanaro UK Income fund. The portfolios are geographically diverse and importantly not overly reliant on any one fund or region for the generation of income.
With a focus on active managers but only where it can add value, we endeavour to keep costs as low as possible. This is backed by our decision to offer both our Passive and Active MPS solutions with an AMC of only 0.15% + VAT. Again, this points to our agnostic approach to the active vs passive debate and allows advisers to choose the best-possible investment option for their clients.
With the investment solutions offered by AJ Bell Investments now significantly expanded at one of the lowest costs in the market, we believe there is a compelling reason to consider our MPS solutions. With our commitment to deliver simple, low-cost and transparent solutions and our focus on giving advisers choice, we are delighted to be entering the next phase of our investment journey.
Past performance is not indicative of future performance. The value of investments may go down as well as up and the income generated by investments is not guaranteed and may fluctuate. You may receive back less than the amount that you invested.
This information is for indicative purposes only and is not intended, and should not be construed, as investment advice. The information contained in this document has been taken from the sources stated and is believed to be reliable and accurate, but without further investigation cannot be warranted or guaranteed to be wholly correct. The views and opinions expressed in this document are not forecasts or recommendations in relation to investment decisions.
The information and data presented in this document were believed to be correct at the time of writing and we are not liable for any subsequent changes.