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Why value and cost really matter in multi-asset investing – Brooks Macdonald

Robin Eggar is Managing Director, Head of UK Investment Management at Brooks Macdonald where he is spearheading the company’s diversified multi-asset approach to investing through both the Cornelian Risk Managed Fund Range and the Cornelian Risk Managed Passive Range.

In this Q&A, IFA Magazine talks to Eggar about their newly reduced cost structure on the Cornelian risk managed fund range. We talk about why, although cost is important, he argues that it is value that really matters, as well as the differences offered by their fund range and why he believes that their adopted multi-asset approach is beneficial for all involved.

Eggar, and Brooks Macdonald, have been building and developing the Cornelian ranges of multi-asset funds with the aim of becoming the investment manager of choice for IFAs. They do this by providing a well-researched and flexible investment solution for their clients.

Their aim is to provide a multi-asset investment range that, as Eggar explains in this conversation with IFA Magazine, allows advisers to ‘sleep well at night’. But how do they do this?

As he highlights, it comes from knowing that their clients’ investments are looked after by an experienced team who are working within clear risk parameters and which are set by the intermediary themselves, as well as delivering genuine value for the underlying client.

IFAM: When it comes to multi-asset investing, how important is cost to both the client and adviser?

RE: “To us, cost is very important indeed – and that’s why we’ve recently reduced the cost of the range to a competitive level. As part of a survey we conducted in 2021, it became clear that about three-quarters of advisers stated costs as being amongst the key factors when considering investing in multi-asset funds – and indeed investing more broadly – for their clients. Other things including quality of service, quality of literature, access to the managers, access to the team, etc are all important to advisers, but that cost point did come through loud and clear as being pivotal.

“Personally, I tend to look at it as value rather than cost, as that’s what people are really looking for. I’ve always been a strong believer that people are prepared to pay for the right investment solution, provided it’s offering them value. That was the key driver when we were looking at reducing the costs on the Cornelian funds.

“We were thinking about what value we were able to extract on behalf of our investors through the Cornelian funds becoming part of the Brooks Macdonald group,  benefiting from the scale that we have and from the managers being able to benefit from the broader team here. We did this so that we were in a position to be able to reduce the costs and deliver a high level of value for the underlying clients, and the advisers who are putting their clients into the funds.

“As of July 1 this year, the AMC has been reduced on the risk managed funds. The active funds’ AMC has been reduced from 0.75% down to 0.50%, which equates to a 0.25% reduction. On the risk-managed passive range, the AMC has moved down from 0.30% to 0.20%. We also looked quite closely at the underlying OCF, which we believe is important. We need to be reporting all of the underlying costs that the clients are exposed to, whether that’s through transaction costs or third-party funds, etc.

“We found that was a key point for advisers, bearing in mind that the cost to the fund wouldn’t be the only cost that their client takes on. There may be platform charges, there are clearly the advice costs and if that can all come in under 2% in total, that appeared to be something that advisers were looking towards. We’re really playing our part in the overall value chain and how we can help support advisers in their conversations with clients by bringing down that overall cost.”

IFAM: What do you see as the USP of the Cornelian range of multi-asset funds?

RE: “There are a number of key features that I hope advisers and paraplanners will be aware of. I’d firstly point to the track record and tenure of the management team involved, who have been running the funds for ten plus years. As an adviser, when you’re looking to invest for your clients, you want to ensure there are managers in place who have a level of tenure and experience to fully support the process and deliver results.

“Another key point is around how the portfolio is constructed. Absolutely they are managed on an active basis and they’re also unconstrained, in that they don’t have a fixed asset allocation framework. It comes back to the risk-managed aspect of having an upper level of expected volatility that the funds will not exceed.

“That allows the managers to invest across a broad range of asset classes and to have the full flexibility to adjust those allocations. There will be different points in the cycle where it will be more or less appropriate to have X% in equities and X% in bonds and other alternative assets, rather than being forced to a rigid 60% in equities.

“I would say that the level of investment flexibility is key. Clearly for advisers having that upper level of volatility gives them the comfort that they’re not going to exceed that.

“Also, when it comes to volatility, we don’t have a fixed lower point. We’re not constrained by low volatility limits that may, on occasion, prevent the manager from taking what would be considered prudent defensive actions to protect investors. If there’s always a range within which you have to be, that bottom end can be quite important to be able to dip below to avoid the worst of what the market may have to throw at us. Having flexibility across different asset classes enables the managers to best fulfil the asset allocation in the most efficient manner possible.

“For us, it’s about delivering the best returns for clients. By having a clear target for the return, this is where it comes to the RPI plus basis which we use as the benchmark for the Cornelian funds. That clarity of objective means that we’re not constrained, in a way that it might be, if it’s just looking purely for relative return against an index, etc. We’re looking to make a real return for investors over a 5-to-7-year cycle. In the short term, in periods like now with inflation rising, that would be much trickier.”

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