At Wesleyan, for example, we avoid investing in illiquid assets beyond a well-established property element that yields strong rental income. This value investment style generates dividend and coupon income – so strong cash flows.
4. Are they right for your clients?
For most people, investing is best done when there is time for any dips in fund performance to recover.
This typically means taking a long-term approach to investing and keeping money in the market for at least five years.
With smoothed and with-profit funds, the same principles apply. It is time in the market, not timing the market that matters.
5. A smoother future
One thing is clear, the current market is serving to further boost the profile of smoothed and with-profits funds, which are having something of a renaissance.
Amid challenging macroeconomic conditions – chiefly high inflation, rising interest rates and a greater degree of volatility – with-profits and smoothed funds are likely to see their popularity continue to grow as advisers and investors look to offset concerns and concentrate efforts on long-term returns.
But for those advisers and clients considering these funds for the first time, it pays to take a careful look under the bonnet of the products on offer.
It is increasingly apparent that not all smoothed and with-profits funds are created equal.
Nick Henshaw is head of intermediaries at Wesleyan
