Six months of benchmark-beating results for our MPS

03 Nov 2020

Jon Walker

Investec

This article is intended for professional Advisers only

Investec’s Managed Portfolio on platforms service has recently become available on more third-party adviser platforms. But that’s not all that’s changed

I, Jon Walker, stepped in to lead the team in April 2020. Six months in, I’m pleased to share an update on our enhanced strategies and the strong performance my team has delivered in the first six months.

Beating benchmarks six months in
 
I’m extremely proud of our six-month performance figures (from 1 April 2020 to 30 September 2020), which show that several changes introduced by my team and I have quickly come to fruition. Each of our five MPS strategies delivered a return significantly ahead of benchmark for this period, as shown below.
 
Whilst we focus on the last six months’ performance due to the timing of the changes, it must be noted that these five underlying strategies have been running since February 2015. This means that we have a full five-year track record. Over the longer period, returns have been good in four of our five strategies relative to the benchmark. Our performance can also be compared to PIMFA or ARC indices. You can access factsheets for each of the five strategies here
MPS performance chart
Advisers can keep a close eye on our future performance as we send monthly factsheets, as well as weekly and monthly newsletters sharing our view on timely topics.
 
But in the meantime, here’s a summary of what’s changed – and what’s stayed the same – with our MPS portfolios.
 
 
A new team with a fresh vision
 
I’ve been with Investec since 2005 and have spent many years contributing to the investment philosophy and process here. I came in to manage MPS portfolios exclusively in April 2020, alongside a dedicated investment management team with this shared focus. My vision is that this first-class team will pair superior performance with excellent service for advisers and clients.
 
My team and I bring a structured, robust, and disciplined investment framework, built on Investec’s outstanding research capabilities, that has been designed to scale our offering across multiple platforms. I believe this is central to delivering consistent risk-adjusted returns in line with our clients’ objectives, and this has been evidenced over my first six months of management
 
Without impacting the strong foundations of the portfolios and the elements that were working well, I’ve introduced a number of specific changes.
 
 
A rigorous reduction in costs
 
One of the first enhancements we made was examining the costs we were incurring and taking decisive action to make our service one of the most competitively priced MPS solutions on the market.
 
We have had great success both by liaising with platforms directly to make available our desired funds and by negotiating access to the cheapest share classes. We intend to continue to drive costs down without compromising our performance or incurring undue risk. We have also capped our OCF at 0.6% which means you can rest assured there is no risk of drift over time.
 
We do invest in third party funds, which means that we do not have control over the transaction charges of the underlying fund manager. As a result, the subsequent MiFID II cost is likely to be higher than the OCF. Whilst there is no way of setting a limit to this if we feel the MiFID II charge was excessive, we would engage with the manager to understand the rationale.
 
 
Broadening our portfolio diversification
 
My team has increased the number of underlying holdings in our portfolios whilst still retaining our optimal exposure towards the different asset classes. We have moved away from strategy fund choices and become more asset class specific.
 
These changes have been made to augment to our existing approach, which incorporates the constant review of asset class returns and cross-correlation between investments that influence our decisions from an asset allocation and fund selection perspective.
 
 
Leveraging IW&I’s extensive research capacity
 
In making investment decisions, we capitalise on the skill and expertise of our dedicated research team, which has an average of 19 years’ industry experience across strategy, bonds, equities, and collective funds.
 
This research is channelled into a group of committees through which our investment policy is formed. Starting from global strategy and filtering down through asset allocation and sector positioning to specific recommendations in bonds, equities, and collective funds.
 
Our guiding principle is that markets are far from perfect and that a research-based approach will reveal the imperfections and provide the best overall results in the long term.
 
 
An investment philosophy developed through collaboration
 
No individual manager can hope to keep abreast of the wealth of information available on the diversity and complexity of the markets. We have adopted a collaborative approach, with an investment philosophy cultivated through daily briefings and weekly meetings that allow for in-depth analysis of a range of ideas and themes.
 
To allow us to draw on the immense pool of experience and talent in our organisation for the benefit of our clients, all our investment policy-making committees are composed of both investment managers and research specialists.
 
As such, our investment philosophy is not slavish to any single ‘style’ such as growth, value, or momentum. Different styles will be used at different points of the economic cycle. Over many years we have found that a disciplined approach to investment incorporating all of these (sometimes conflicting) factors, coupled with the flexibility to embrace change, has given us a performance track record of which we are extremely proud.
 
 
A dedicated committee with oversight of the investment process
 
Funds are now overseen by the newly established Platform Strategies Group (PSG), a centrally run monitoring committee. The PSG runs the portfolios according to the firm’s tactical asset allocation using only the best options from our collectives research list (subject to availability on each platform).
 
Using an automated alerts process, the committee ensures that the composition of our portfolios continues to reflect our house view and adhere to your client’s mandate.
 
 
A continued commitment to active management
 
At Investec, we are unashamedly believers in active funds. Whilst most active funds don’t outperform the overall market, a substantial minority do. Knowing that this rich pool of successful active funds exists, we believe that we are well-placed to identify them in advance using proprietary active fund selection framework designed to identify funds with the characteristics most likely to deliver future outperformance.
 
 
Achieve more with our actively managed MPS
 
Whilst we know past performance is not an indication of future performance, we are pleased that over the last six months we have seen gross total return outperforming the benchmark. We know how important performance is for Advisers when assessing the merit of a provider.
 
With an AMC of just 0.2% plus VAT, we believe it’s the best value MPS solution on the market. And it’s now easier to access since it’s available on more leading platforms.
 
If you believe your clients would benefit from an actively managed MPS with a proven track record, backed by both a dedicated investment management team and an extensive research capability, all at one of the lowest fee structures in the industry, then please get in touch to find out more.

Jon Walker

Investment Director

I lead the team responsible for managing Investec’s Managed Portfolio on Platforms service and Fund Service. I am also a member of the Liverpool discretionary desk and manage multi-asset portfolios on behalf of private clients, trusts, pension funds and charities. My team and I focus on delivering outcomes that meet the objective and risk of each portfolio. We have established a structured, robust and disciplined investment framework, focussed on portfolio diversification, and careful cost management without compromising performance. I sit on Investec's Investment Committee and contribute towards our UK equity and property selections, through various investment selection committees. By working in collaboration with Investec’s extensive team of research specialists, we have developed an intelligent and flexible investment philosophy, adopting different styles at different points of the economic cycle.