About 2.66 million people are looking to increase the amount of money...
Nearly half of those planning to invest more (45% of respondents) said it was because they need to protect their money from rising inflation and tax, and 44% said it was because they wanted to save more for retirement. 1 However, 89% of retail investors describe their risk profile as ‘medium’ or ‘low’.1
The FSA recently reiterated its guidance2 that it is the responsibility of advisers to ensure that they understand the nature and risks of products or assets selected for customers, that they ensure recommendations are consistent with the risk description confirmed with the customer, and that care should be taken to ensure the suitability of any investment at all times.
With this in mind, a growing number of managed funds are being rejected by intermediaries because they are too volatile2. Our research shows that IFAs surveyed won’t recommend 33% of Balanced Managed Funds and 28% of Cautious Managed Funds because they are ‘too risky’. 3
Supporting this view is new analysis4 from RBS which reveals that despite the name of the two categories – Cautious and Balanced – many funds in these sectors have had high levels of risk, as measured by volatility. RBS analysis of Cautious Managed funds reveals that the 10 largest by assets under management saw their volatility rise significantly during the difficult market conditions of 2001 and 2008/9. During 2008, some Cautious Managed funds saw their annualised volatility double while a number of Balanced Managed funds had volatility levels in excess of 25%.4
To help IFAs better match the risks within an investment against client expectations, RBS has announced that it is targeting the retail fund management sector with the launch of two new managed funds that aim to ‘tame’ volatility. The ‘Volatility Controlled Cautious Managed Fund and Volatility Controlled Balanced Managed Fund aim to manage volatility and keep this markedly below sector averages, whilst delivering growth over the medium to long term. The bank will be using a combination of strategies around diversification, trend analysis and volatility control to deliver its new propositions.
Both funds, which are available for Stocks & Shares ISAs and accept balances of £1,000 or more, have competitive charges. The annual management charge for each is 1.00% compared to an average in the UK of 1.38% for Cautious Managed funds and 1.41% for Balanced Managed funds.5 The expected TER is 1.25%.per annum.
The Volatility Controlled Managed Funds from RBS aim:
1. To maintain consistent volatility across the different risk profiles
2. To be transparent and easy to understand by IFAs
3. To deliver on performance
4. To be competitive on charges
Please note that investing in the Volatility Controlled Managed Funds puts investors’ capital at risk and they may lose some or all of their investment.
If you require any further information, please visit www.rbs.co.uk/managedfunds or contact us on 0845 680 7895.
Yours sincerely,
1. ICM interviewed a random sample of 2013 adults aged 18+ online between 7th and 9th January 2011. Surveys were conducted across the country and the results have been weighted (grossed-up) to the profile of all adults (over 18s). ICM is a member of the British Polling Council and abides by its rules. Further information at www.icmresearch.co.uk
2. FSA, ‘Proposed Guidance on Assessing Suitability’: Establishing the risk a customer is willing and able to take and making a suitable investment selection; January 2011
3. IFA interviews were conducted by George Street Research in December 2010. A total of 206 interviews were completed amongst a cross-section of advisers throughout Great Britain with a weighting towards those whose business is primarily with investment clients. Quotas were imposed on the total sample in respect of size of IFA firms, region and areas of specialisation.
4. RBS Global Banking & Markets and Lipper, 31 December 2010
5. Source: Lipper. Analysis of Investment Management Associations Balanced Managed and Cautious Managed sectors, 31st December 2010
The Volatility Controlled Cautious and Balanced Managed Funds are sub-funds of Brushfield Defined Funds (“the Company”). Smith & Williamson Fund Administration Limited is the Authorised Corporate Director (“ACD”) of the Company and The Royal Bank of Scotland plc (“RBS plc”) is the appointed Investment Manager to the Company. This advertisement is issued by RBS plc. Investors should read the full and simplified prospectuses of the Company carefully before investing. The value of investments can go down as well as up and investors may not get back the full amount invested. Simulated performance or volatility based on past data is not an indicator of future performance or volatility.
