In this IFA Magazine Q&A we talk to Jon Walker, Investec’s MPS Investment Director. We find out why he believes that Investec’s investment expertise, value for money approach and reputation as a trusted brand makes their MPS a prime consideration for advisers and their clients.
IFAM: What options exist within the Investec MPS range?
JW: Across the Managed Portfolio Services (MPS) range we have seven different investment strategies. These now include two sustainable MPS strategies, enabling advisers to choose the one most appropriate for their clients’ needs and attitude to risk. We believe that choice is very important for IFAs.
There are five standard portfolios namely Defensive, Cautious, Income, Balanced and Growth. They largely straddle the risk spectrum as you’d expect.
From a sustainable perspective we also have the Sustainable Balanced and Sustainable Growth strategies.
IFAM: Has the Covid pandemic been a challenge to your performance across the range?
JW: Actually, we’ve been really pleased with the performance we’ve delivered. We have a five year track record, some of which has been inherited. Our team took over management of the portfolios back in April 2020, just as the Covid pandemic was beginning to impact. From then and up until the end of Q3 this year, I’m proud to say that we’ve outperformed in all five of our main strategies relative to our peer group.
Our balanced portfolio is the largest in terms of funds under management. It has achieved top quartile performance over that time period – which was certainly a challenging one for any asset manager.
I should say though, that the reason for this strong performance is of course our robust investment approach.
IFAM: Can you briefly describe your underlying investment strategy?
JW: Our underlying asset allocation strategy is very focused. Over time, we’ve reduced the number of individual fund holdings and made the portfolios much more conviction-led as a result. This has also allowed us to really drill down on the costs of those funds we wish to hold, which can involve some aggressive negotiation with fund management groups! I would argue that our high impact, high conviction positions have really helped us to reduce costs overall as well as deliver robust performance.
As an example here, Baillie Gifford American has been one of our biggest positions. It has been a big driver of performance for us since we took over the management. Our approach has allowed us to emphasise the most important fund positions and weight them accordingly so as to get the best results for our underlying investors.
IFAM: What about access and availability to the portfolios? Do you have many platform links? What about links to risk-rating agencies?
JW: Yes we do. Of course, access to and availability of the portfolios are crucial. Advisers can access all our MPS portfolios across a large range of platforms. We’re about to add Fidelity’s FundsNetwork to these, which will bring the total to 17 different platforms through which our portfolios can be accesses.
Our core strategies are independently risk-mapped to six independent risk-rating agencies – namely Finametrica, Defaqto, Oxford Risk, Synaptic, EV and Dynamic Planner. This means that IFAs have a wide choice of providers. We are currently liaising with these providers to explore risk mapping our new Sustainable MPS strategies too.
IFAM: Could you talk us through the costs of the strategies?
JW: Minimising the underlying costs for our investors is very important to us. We’ve always been focused on making sure we have a sound investment proposition – and that includes being very cost-focused. On our standard portfolios, our annual management charge is just 0.2% – with no VAT either. We have a targeted OCF of just 0.5%. However, for each of our five core strategies there’s a cost cap in place of 0.6% OCF.
We believe that this is incredibly helpful for IFAs. It gives them certainty when talking with their clients and can therefore have really clear and confident conversations with them about cost. There’s no drift in our portfolio as 0.6% is the cap.
This means we’re constantly acting as an intermediary between the platforms in order to access the cheapest possible share class. But there’s negotiation too with the fund management houses. One of the considerable benefits we have, given Investec’s size, scale and reputation, is that it allows us to negotiate more aggressively to get discounts on behalf of our clients.
IFAM: When it comes to the team running the MPS and the experience they have, how does this work at Investec?
JW: We have a very strong team here. Supporting me on the MPS team here we have another four investment managers and an investment assistant as well. This team dedicated to managing our MPS portfolios has an average of over 8 years’ experience each. Our task is to manage the portfolios to make sure that they are in line with the respective risk-rating agencies and all categorized correctly. There’s a huge amount of research that goes into the portfolios behind the scenes, which helps us to deciding on what funds to use and how we use them.
One area which I believe really differentiates us is that we aim to produce the ‘best of breed’ from an investor’s perspective. Whilst we are the Investec MPS team, we’re trying to give every single client the purest form of an Investec portfolio. We don’t make unilateral decisions.
We’re not trying to overlay our own judgements on a lot of these funds. Our research team consists of more than 20 people with the average experience of 19 years each. This gives us an ideal resource which provides ideas to our team in order to help us design and build robust portfolios.
I’d argue that our structured, robust and disciplined investment process ensures the best ideas of our research team are reflected in our models. Clients can be sure that we’re harnessing the full scope of Investec’s investment management abilities in order to help us to build portfolios to meet their investment objectives.
As a team, we’ve split our investment capabilities into different asset class responsibilities – such as fixed interest, property, alternatives, geographical regions etc. so that we have individual specialists who can work together to undertake a deep dive into research and analysis.
This ensures that we have a research-led investment process which can go deeper not just broader. It works really well for us and puts us in an extremely strong position.
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