Built on solid foundations

This approach has helped ensure the funds’ resilient performance, as each of the funds has outperformed its respective comparator benchmark since inception.

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The main driver of this outperformance has been the Portfolio Funds’ choice of investments in underlying funds, depending on market conditions, while keeping to the set risk profiles and volatility boundaries. This allowed the funds to take account of shorter-term market trends and volatility, while still looking to achieve the long-term aims of the funds.

A risk-targeted approach is also highly relevant given the recent shift in the financial environment. Although the rise in interest rates has made cash investments increasingly attractive to investors, opting out of the investment markets altogether is unlikely to be a viable long-term solution. Risk-targeted funds offer a way of retaining access to investment markets, but in a controlled way, allowing investors to participate in the long-term trajectory of real returns. Owing to inflation, cash rates have not tracked CPI – meaning that investors need to put some risk on the table to enable them to potentially achieve their desired return. Using risk-targeted funds also removes the need to try to time the market, which comes with its own challenges.

At the core of the Portfolio Funds’ investment approach is the team’s top-down approach to asset allocation. The Portfolio Funds are mainly funds of in-house funds, meaning that they tap into the expertise of our fixed income, equity and property managers, who have wide experience of the various individual asset classes. However, they also have the ability to allocate to external funds or include index trackers depending on the multi-asset team’s views. The multi-asset team also adjusts fixed income duration depending on our view on the potential direction of global interest rates. This approach helps ensure that the Portfolio Funds stay closely aligned to their investment objectives. It also helps to keep costs under control.

Managing to a specified strategic asset allocation also helps mitigate potential behavioural biases which can skew investors’ – and managers’ – perceptions, causing them to allow shorter-term market movements to dictate longer-term goals.

When it comes to achieving long-term growth on behalf of your clients, ensuring that you are matching clients’ investment goals and attitude to risk is vital. Risk-targeted funds such as the Portfolio Range can offer a close match to a client’s objectives – and then, as risk-targeted funds have embedded volatility boundaries that stop them from changing risk profile, help to ensure that their investment continues to match their risk profile.

This offers another layer of governance for advisers, as it limits the need to review a client’s investment between pre-defined review periods. The FCA emphasised back in 2012 how important it considers the accurate alignment of the risk description of risk-rated funds with their actual risk profile to be. In other words, the risk profile of a client’s investment should only change when the client’s own risk profile changes.

Risk targeting contrasts with risk rating, an approach that gives a snapshot of the level of risk that a fund is taking at a given time. However, because the risk level is not central to its mandate, the level could change, and potentially also shift in line with the style or factor bias (for example, it could have ESG or income-focused objectives).

Multi-asset funds, in general, can be suitable for all types of clients – whether they’re accumulating wealth or are in the process of drawing down in retirement. They’re ideal for clients who want to be sure their investments are managed closely in line with the risks they’re willing to take but don’t want to pay the higher charges associated with a single investment solution.

The WS Canlife Portfolio Fund range could be a good fit for advisers looking for predefined multi-asset solutions aimed at a target market of clients who are looking for long-term growth within their assigned risk profile. By taking a longer-term view within the scope of the customer’s risk profile, the range can offer a straightforward way of meeting their needs both now and into the future.