Talking to IFA Magazine, Brooks Macdonald’s Frank Atkins discusses the group’s MPS proposition and highlights how he and his team achieve successful diversification across the range despite challenging market conditions.
The last 18 months have been some of the most turbulent for even the longest-serving asset managers in the business. Uncertain markets, unstable governments and record inflation have led to cautiousness which ultimately produced some poor and often negative returns.
However, Brooks Macdonald have attempted to combat this with their MPS offering. A focus on service, performance and cost, combined with a client-centric approach, allows the investment manager to offer services for a range of client requirements.
Also, as part of the interview, Frank Atkins, Investment Director at Brooks Macdonald, explored the ‘passive vs active’ debate and explained his team’s agnostic standpoint and highlighted why flexibility is important to achieve the best performance for clients.
IFA Magazine: What do you think makes the Brook Macdonald MPS range an attractive proposition for financial advisers and their clients?
Frank Atkins: “It’s a combination of three factors; service, performance and cost. In terms of service, we’ve got a comprehensive suite of multi-asset investment solutions available. We’ve got a segregated MPS portfolio range and also unitised funds that are available to advisers. Our aim is to ensure that we have a suitable offering available to fit a wide range of client requirements.
Our MPS solutions are available either directly through Brooks Macdonald or via one of 24 external platforms. There are both active and passive options available. We also have MPS that targets the outputs of both the Defaqto and Dynamic Planner risk profiling tools. This has proved popular with advisers who want to ensure that their clients’ portfolios remain aligned with their risk profile until they next conduct their suitability review.
Then, for advisers who prefer to use unitised solutions rather than segregated MPS, we have a range of four multi-asset funds, the Brooks Macdonald Blueprint range. These mirror our core MPS solutions.
When it comes to what is most important, I believe that it’s the ongoing service that we offer to our supporting advisers. We work extremely hard to ensure advisers and their teams are kept up to speed with our views on asset allocation, portfolio construction, and of course, any changes that we’re making to client portfolios and any rebalances.
All clients that come into multi-asset investment solutions here at Brooks Macdonald come through a financial adviser. Working in partnership with financial advisers is therefore key and our focus is to ensure that they’ve got all the information they need, especially when they’ve got their periodic client reviews coming up. We understand how important it is that advisers are able to provide their clients with the assurances that they need. Providing them with information and showing that their money is in good hands and of course, hopefully that their portfolios are performing in a way that they would expect. Fundamentally, our MPS and multi-asset funds are going to be judged on their ability to provide a positive, risk-adjusted return against a benchmark or a peer group over the medium to long-term period.
Brooks Macdonald has a well-established centralised investment proposition in place and the managed portfolio service is run from that. The process itself combines top-down strategic asset allocation alongside bottom-up research and fund selection. It has proved to be a successful approach over the years. All four of our Blueprint multi- asset funds are either first or second quartile solid performers in their respective sectors.
Finally, in terms of cost, I believe that we are competitive without engaging in a race to the bottom. In such cases, there can be a risk that performance and service can end up being compromised if there is solely a focus on cost. Our MPS on platform is run to not exceed a 1% TER before adviser ongoing charges are taken into account. Overall, I’d argue that the Brooks Macdonald MPS solutions are highly compelling for advisers and their clients. Our MPS AUM has doubled in size to over £4 billion in that past five years and so with those figures I’d suggest we can be confident that advisers feel the same way.”
IFA Magazine: How do you look to achieve diversification across asset classes in what have been challenging market circumstances?
Frank Atkins: “It’s been the biggest question for investment managers over the past 18 months. With the emergence of sharply higher inflation, we saw increased correlation between equities and bonds, especially those long duration assets. Within the fixed income component of our portfolios, we’ve been concentrating our exposures at the short end of the yield curve, where bond prices have been less sensitive to rising interest rates. That’s helped to provide the portfolios with an element of downside protection in what were very challenging circumstances last year.
Within the equity portion of the portfolio, we’re focusing on ensuring a proper balance between the predominantly US focussed growth sectors such as technology and biotech within the healthcare space, alongside an increased weightings to UK large-cap equity income funds. They offer greater value and cyclical exposure, and we think that whilst the future path of inflation remains uncertain, we think that this is the best approach to take at the current time.
Finally, within the alternatives allocation of the portfolios, we’ve been increasing weightings there, focusing in particular on strategies that are looking to achieve are turn that is uncorrelated with equity and bond markets. We hold those assets because we expect them to provide a positive return fi we do see bond yields resuming that upward trajectory.”
IFA Magazine: Where do you stand on the active vs passive debate?
Frank Atkins: “We are broadly agnostic on it. If you look at past evidence, it suggests that in certain markets, such as U.S. equities, it’s beneficial if you take a majority passive approach. Therefore, within our active MPS portfolios, we’ve previously employed an index tracking fund as the largest U.S. equity position. We have then supported that with smaller positions in more dedicated growth or small cap strategies. If you take 2023 YTD, passive has certainly been the place that you want to be.
However, in the short term, I would have concerns over the increased concentration of a handful of U.S. mega-cap stocks that have provided the majority of the returns so far. In other markets, if you look at the U.K. equity market and Asia ex-Japan, two areas where we currently have high conviction, we think that a more active approach is best there.
Therefore, advisers will find that the vast majority of our exposure will be through actively managed funds with a smaller proportion to an index tracking investment. In terms of flows and where the assets sit in the service the majority of MPS assets do sit within the active portfolios.
We are seeing and have seen increased demand for our blended offering. That suits those advisers who don’t particularly have strong views on the active versus passive debate, but they also see the benefit from the blended solution in the sense that you can use it to reduce the overall total expense ratio.”
In summary, as an asset manager who is completely aligned with the needs of advisers and their clients and dedicated to servicing their needs efficiently and effectively, Id’ strongly encourage readers who aren’t already familiar with what Brooks Macdonald does and how they operate, to take a good look at the range. I’m pretty sure they’ll be impressed.
To find out more about the Brooks Macdonald Managed Portfolio Service and multi-asset funds please visit www.brooksmacdonald.com/investment-management
Frank Atkins is an Investment Director, Brook Macdonald’s Multi-Asset Team
Frank joined Brooks Macdonald in 2010 and co-manages our Managed Portfolio Service and Multi-Asset fund range. Prior to joining Brooks Macdonald, Frank worked at Barclays Wealth. He has over 10 years’ experience in financial services, Frank holds the Investment Management Certificate (IMC) and the Certificate in Private Client Investment Advice & Management (PCIAM). Frank is the head of the Far East & emerging markets research team.
