Here in part one of IFA Magazine’s recent conversation with Vince Smith-Hughes, Director of Specialist Business Support at Prudential, we talk about what he sees as the main reasons behind the growing popularity with advisers and paraplanners of the PruFund range of smoothed funds.
In today’s volatile market conditions, a growing number of advisers and paraplanners are seeing the benefits of the PruFund range of funds which aim to grow clients’ money while giving them a smoothed investment experience. In the following Q&A, we catch up with Vince Smith-Hughes to discuss how and why PruFund funds are being increasingly recommended for advisers’ clients and the types of client situation where he believes that the range is particularly appropriate.
IFAM: IN WHICH TYPE OF CLIENT SCENARIOS ARE ADVISERS RECOMMENDING THE PRUFUND RANGE?
VINCE SMITH-HUGHES: PruFund funds are proving to be a very popular choice for advisers. The funds are available across a broad spectrum of tax wrappers from onshore and offshore bonds to ISAs to pensions, including drawdown and also trustee investment plans.
The fact that it contains a range of funds that are suitable for different clients and their differing attitudes to risk broadens the appeal of the range.
The nature of PruFund funds means that they attract a wide spectrum of clients – some who are looking to increase risk, some who are looking to decrease it.
Firstly, it’s attracting investors who are looking to increase their investment risk. These may be deposit holders at the moment, seeing their capital eaten away by inflation and they’re looking to investing in real assets. Perhaps they’re not comfortable with the normal day to day volatility of the stock market, but they’re still comfortable to take some element of risk.
On the other hand, with many global stock markets having performed extremely well of late, it’s also attractive for those clients for whom advisers or paraplanners may be looking to decrease their overall level of portfolio risk and volatility by investing in a very broad and diverse asset mix. The benefits of a smoothed investment such as that available with the PruFund range can be very attractive in these situations. Overall though, I’d strongly argue that it is appropriate for and is attracting clients from both ends of the risk spectrum. I think a nice way to summarise is it is that because of the smoothing effect, PruFund funds can provide a ‘sleep at night approach’ for clients who may be worried about the impact of such volatility on their hard-earned cash.
Because of the very diverse nature of the PruFund range, sometimes advisers will invest solely in PruFund for a particular client or in other cases it can form the core part of a core and satellite investment portfolio approach. For example, if an adviser’s client has exposure to tactical investments in a particular area, they may want to do that and hold PruFund as a core part of it.
IFAM: DO YOU BELIEVE THERE ARE PARTICULAR CLIENTS FOR WHOM THE PRUFUND RANGE OF FUNDS IS NOT PARTICULARLY SUITABLE?
VINCE SMITH-HUGHES: Yes, one particular client situation where I would highlight PruFund funds as being unsuitable is where an adviser’s client wants to have the value of the underlying assets reflected immediately in their policy values. For such clients, PruFund really isn’t the place to be because, as a result of the investment management and smoothing process it uses, it will lag a rising market and it will lag a falling market too. Clients need to be in it for the long term, ideally a five year minimum investment term. It’s not suitable for clients if they’re going to be worried about very short term movements in the actual value of the fund.
IFAM: COULD YOU EXPAND A LITTLE ON THE PAST PERFORMANCE OF PRUFUND JUST TO GIVE US AN IDEA OF WHAT HAS BEEN ACHIEVED TO DATE?
VINCE SMITH-HUGHES: Yes, if we look at PruFund Growth Series A, it has delivered a total return of 15.32%* in the year to 31/12/2021. That compares with 7.2%* over the same period from the IA mixed investment (20- 60 equities) sector, which is an appropriate benchmark for comparison purposes. Of course, PruFund is a long term investment and over the longer term we can still report excellent numbers for PruFund Growth. If you look at the five year period to 31/12/2021, you’re looking at 37.66% from PruFund Growth compared to 26.2% from the IA mixed investment sector. If we look at the ten year term, you’re looking at 95.23% versus 74.27%
It’s important to stress that investment in PruFund really is for the long term. That’s the nature of it and that’s where it’s designed to work within clients’ portfolios.
* source Financial Express Analytics.
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About Vince Smith-Hughes
Vince is Director of Specialist Business Support at Prudential. He has worked in the financial services profession for over 35 years, and has previous experience as an IFA as well as holding senior pension roles at Clerical Medical and Winterthur Life. Vince is an experienced platform presenter at industry events and a regular contributor to trade and national publications on all matters relating to financial planning. He is a Fellow of the PFS.