The Schroders Investment Solutions business, which operates model portfolio and fund of fund operations for financial advisers is targeting £10bn in assets under management by 2025.
The business unit presently has assets under management of £4.5bn, across a range of active-only, passive-only and blended portfolios, along with sustainable investment ranges.
Alex Funk, its chief investment officer, said: “We hope we are differentiated by the scale and breadth of the service we can provide, we have got people who are economists and can do the macro, we have people who work on the asset allocation and of course we have fund pickers.
"This is not about driving assets to Schroders funds, we have a rule that not more than 20 per cent of the AUM in aggregate of the assets can be in Schroders funds, and right now, its 5.5 per cent.”
Many of the strategies in the range own passive funds, a type of product not offered by Schroders.
Funk said: “Last year we were ranked sixth of seven biggest providers in the MPS market, we want to partner with advice firms that are looking to grow, not with just any advice firm, and ultimately, our target is to have assets under management of £10bn by 2025.
"I also hope that we are providing clients with a better service. We have 25 sales guys in the field, they visit the advisers regularly and explain any changes we have made to the models. We also provide an impact report, so clients can see the difference their sustainable investments are making, and guides to investing.”
The fund of fund range is predominantly used by clients with general investment accounts, as holders of those accounts would face a capital gains liability each time a model portfolio rebalances.
Relatively unusually for a large fund buyer, the Schroders Investment Solutions team is happy to buy smaller funds and to provide the seed capital to newly launching funds, if the fund manager has a track record on a previous fund.
He says: “There is no hard or fast rule in terms of a fund becoming too big, but we do keep a keen eye on small- and mid-cap funds as they grow, those funds can be constrained by liquidity in the underlying shares, and so have to start investing in larger companies than was previously the case, and this can impact performance.
"We would tend to use more passives when we think economic or market conditions are quite benign, some providers just buy passive as a way to keep charges down, but we would say that investing in a passive fund is an active investment decision, and when there is volatility in markets, we would increase our active exposure."
david.thorpe@ft.com
