In this exclusive interview with IFA Magazine, Parit Jakhria and Adrian Gaspar from the M&G Treasury & Investment Office discuss the past, present and future of the PruFund range and highlight the numerous benefits that advisers value most.
In today’s volatile investment conditions, knowing where to invest a client’s wealth is one of the most important, and often most challenging decisions facing advisers. Consistency, clarity, performance and support are but a few of the factors that need to be considered when looking for appropriate investment solutions.
The PruFund range offers a globally diversified, expertly managed multi-asset solution. It aims to offer the potential for growth over the medium and long term while smoothing some of the ups and downs of short-term investment performance.
In conversation with IFA Magazine’s Brandon Russell, Parit Jakhria, Head of Long-term Investment Strategy, discusses the long-term investment philosophy of PruFund and analyses why the fund continues to be scalable over time. Meanwhile, Adrian Gaspar, Head of Client Portfolio Management, delves into the ways in which advisers are utilising the fund range in both the retirement/decumulation and accumulation space.
IFA Magazine: A lot has happened since PruFund Growth was launched in 2004. Can you give us an overview of the long-term investment philosophy and process for the underlying investment strategy and explain how it has evolved over that period?
Parit Jakhria: “You’re right, a lot has happened since PruFund Growth first launched in 2004! A global financial crisis, Brexit, a European Sovereign debt crisis, a global pandemic and now war in Europe and the Middle East have been just some of the major challenges for investment strategists.
“Despite all of this, our investment philosophy and process have really worked well and adapted to changing capital markets. It follows a time-proven approach and a tried and tested framework that takes a forward-looking view across capital markets and geographical regions, both public and private.
“One aspect that is somewhat unique to us is our in-house economic modelling, and that has really helped us navigate through turbulent times. As an example, prior to the Covid pandemic, our modelling showed that the economic cycle was a lot more vulnerable to an exogenous shock thus we de-risked. We re-risked once liquidity measures were put in place quite soon after Covid. An important aspect of this was that a lot of our modelling highlighted potential inflation scenarios therefore we really put a greater value to our real asset exposure quite soon after Covid, which was very different to other investors.
“What has really evolved is the range of investment opportunities globally, across public and private markets. For example, when PruFund Growth was launched, Asian Bond markets were in their infancy, Indian equities weren’t really an asset class, and our alternatives exposure including real estate was much smaller and UK focused. Nowadays, the diversification of the fund is second to none.
“Ultimately, I hope that by providing a relatively predictable level of return over the years, we have enabled our customers to achieve their savings goals and give them confidence to remain invested for the future.”
IFA Magazine: How scalable is the PruFund range proposition?
Parit Jakhria: “PruFund is part of M&G Life’s With-Profit products, the total of which are £110bn+ and growing. Within that, the PruFund range has grown from zero to £60bn within the 20-year period since its launch.
“On that basis, I’d say the proposition is very scalable from here. In fact, I’d argue that its size and scale is actually helpful and adds to the potential we have to capture some of the lucrative opportunities within the private markets where investments offer the potential for strong risk adjusted returns but are illiquid and quite lumpy.
“For example, in Asian real estate, the standard size of offices there will be between £2- £500 million. Some of the larger infrastructure deals require quite a large investment to go and to be diversified, which is always really helpful. In addition, it also gives us the economies of scale to have segregated sleeves, for example, Indian equity.”
IFA Magazine: What are some of the longer-term investment themes that you are building into the fund that you hope will see it through the next few years?
Parit Jakhria: “The success behind the funds we manage is built on solid foundations of risk, return and diversification. We constantly evolve the underlying positioning as we seek to capture the best opportunities wherever they may be.
“Our bias is to focus exposure on those regions where global growth is coming from, as these tend to be the areas that provide the strongest potential returns.
“Looking forward, there are three main themes that we feel are important post Covid, and we aim to ensure that the fund is well placed for each of these as follows:
“Firstly, dealing with unexpected inflation. Going beyond equities and bonds for diversification is important. As we saw in 2022, and post Covid generally, it is not sufficient to have mainly bonds and equities in the funds. Unexpected inflation can negatively affect both bond and equity markets, resulting in higher correlations in some scenarios. The PruFunds are blessed to have a high quality, diverse allocation to a spectrum of real assets.
“Secondly, shorter economic cycles. We believe that the shifting modus-operandi of central banks could lead to shorter economic cycles and structural shifts in global markets. This means we must keep the asset allocation dynamic and allow for evolving asset classes.
“The third theme is geographical diversification. Not only are economic cycles shorter, but they are also a lot more diverse, and we are well equipped with our diversification as well as granular building blocks to capitalise on this.”
IFA Magazine: You’re often out speaking to advisers about PruFund. What are you hearing from them in terms of how they use it as part of the financial planning process and how has it benefitted the relationship with their clients?
Adrian Gaspar: “From my perspective, I’d say that financial advisers have had a lot to deal with Consumer Duty being just the latest challenge that’s been presented to them. Investment management is a crucial function, but that is one that they can outsource. PruFund is being used extensively in the retirement space. We’ve had a lot of success in income drawdown because the stability of returns is very useful when you are retirement planning for clients.
“We also have plenty of advisers that use PruFund in the accumulation space for people growing their wealth. One of the key reasons to utilise it this way is that they’re going to get exposure to asset classes that are quite difficult to access elsewhere. For example, getting global exposure to a high-quality portfolio that looks at prime offices, infrastructure projects, warehouses or private rented residential is quite difficult to do through a lot of other solutions.
“We offer a broad spread of investments for those people in accumulation, and it is not just public markets, but private markets too. That’s the big differentiator. That’s the big strength. That’s where scale really, really helps in areas such as real estate and infrastructure as well as private credit.
“A key role that we have as markets evolve and as advisers have more and more challenges, is just to keep communicating with them. For us it’s crucial to keep in touch, building their understanding of what we do, where we invest and why, and the benefits that we believe that will bring to their clients over time.”
“When we continually give advisers a good look beneath the bonnet and a clear understanding of what underlying PruFund portfolios look like, it is really interesting to them and secondly it shows that we truly believe in diversification. Over time, that really builds confidence. As an addition to that, PruFund invests in a lot of interesting assets. This can often provide useful sound bites for advisers to help bring the investment to life for their clients and thus further build confidence in the portfolio from all parties.”
In conclusion, the PruFund range prides itself on its future-forward capabilities for long-term financial success. Throughout the interview, Adrian and Parit both stressed the durability, adaptability and capability of PruFund over the long-term whilst also delivering in the medium-term as well. Paired with the strong adviser support and trust built up over the years, the range is led by a team brimming with industry expertise. This all suggests that PruFund is an investment proposition that can bring peace of mind to both advisers and their clients whilst smoothing some of the short term ups and downs of direct stockmarket investments through their established smoothing process.
For more information about PruFund, click here
Parit Jakhria
Director of Long-Term Investment Strategy, M&G Treasury and Investment Office
Parit is responsible for the long-term investment strategy at the M&G Investment Office which includes Strategic Asset Allocation for circa £153 billion (as at 31 December 2023) of multi-asset and annuity funds, as well as providing client advice on hedging and product design.
Prior to joining the Treasury and Investment Office, Parit undertook a variety of roles within the Prudential Group across Risk, Finance and Actuarial functions which culminated in the overall responsibility to produce Prudential UK’s regulatory capital requirements. He graduated with a Masters in MORSE from Warwick University, covering mathematics, operational research, statistics, and economics. Post-graduation, he has qualified as a Fellow of the Institute of Actuaries as well as a CFA Charter holder. He has also played an active role for the Actuarial profession, in reviewing the Actuarial Syllabus, being part of the Finance and Investment Board and previously Chair of the Finance and Investment Research Committee.
Adrian Gaspar
Head of Client Portfolio Management
Adrian joined M&G in 2015 having held a variety of roles in different areas of financial services since starting in 1987. He was a founder member of staff at OBSR (Old Broad Street Research), leading the consultancy side of the business. He also successfully established a fund ratings methodology and brand at Defaqto before gaining experience in investment sales at Hearthstone Investments.
He and his team are passionate about providing advisers with clear insights into how the M&G Treasury & Investment Office oversee multi asset portfolios.
