• Identify the population of fund ranges in the market – perhaps using a study such as Defaqto.
• Ensure that the characteristics of the fund range fit the needs of the firm – breadth to avoid shoehorning, consistency of approach, quality of reporting and communication.
• Ensure that the fund range identified is aligned to, or can be mapped to the firm’s preferred risk profile and approach.
• Ensure that the approach adopted by the investment manager is clear, transparent and fits with the approach of the firm.
Unfortunately, having identified your shortlist of funds there is not yet a sector or index that can provide an easy comparison for all risk tools. Advisers currently have to turn to the tried and tested approaches - comparing the historical performance using market tools such as Trustnet, Financial Express and others until such time as an appropriate sector or index is developed and introduced to the market.
John Jackson is managing director of Intermediary Business of Cornelian Asset Managers
Key points
Advisers typically look beyond conventional IMA sectors when trying to match a suitable multi-asset fund with their client’s specific level of risk
The closest that the conventional IMA sectors come to grouping together funds taking different levels of risk is in the three mixed investment fund sectors.
A large number of funds with a risk rating are not actively risk-managed.
