We’ve long believed that our approach to investment management was the right one for clients. Now, looking at some recent figures, we’ve been proved right. Jeremy explains…
An article in an industry publication recently caught my eye. The article, published in the 29th June edition of New Model Adviser, focused on the investment performance achieved by Discretionary Fund Managers during the Covid-19 crisis and over the last five years.
The pros and cons of DFMs
By way of background, a Discretionary Fund Manager (DFM) is an investment professional who builds and manages a portfolio of investments on a client’s behalf.
A number of DFMs run their own ‘managed portfolio services’ (MPS). Unlike BlueSKY (who do not have discretionary permissions) a DFM can buy and sell the underlying stocks and shares without consulting the end client. Conversely, at BlueSKY we need to obtain your permission before we make changes to your investments.
A perceived advantage of a DFM, therefore, is that, by having this ability to buy and sell more nimbly, they could generate better returns (or reduce risk) for the end client.
In the past, DFMs have been viewed by some as expensive and unnecessary for clients, unless a very particular mandate is required (i.e. avoiding particular investment sectors because of ethical views or complex taxation considerations).
At BlueSKY, we do not currently use DFMs, as our current view is that they are an additional and unnecessary cost for the vast majority of our clients.
Why our investment theory works
To remind you, the BlueSKY investment process is based on established investment theory which believes that the best way to achieve investment success is to hold a broadly diversified portfolio of UK and global assets for the long term.
Depending on your ‘attitude to risk’ you will have a greater proportion of your portfolio allocated to shares (higher risk) or bonds (lower risk). Company shares are expected to produce the highest returns over a long period of time but will be the most volatile in the short term.
Every quarter, the BlueSKY Investment Committee review the investments held in our portfolios and make decisions on whether any changes need to be made.
These changes are communicated to our clients at annual review time. Because we believe that patience and time are the two biggest drivers of investment success, it is unlikely that we would recommend sudden or large changes to the underlying investments.
Needless to say, the Covid-19 pandemic has impacted on the performance of almost all investments over the short term.
Nonetheless, now seems like a good time to review the performance of the BlueSKY portfolios over a longer time period (three and five years) and to compare how our performance stacks up against the managed portfolio services offered by various discretionary fund manager groups.
|Managed Portfolio Service||3 Years (to end of April 2020)||5 Years (to end of April 2020)|
|BlueSKY Growth Portfolio 5 Rank||4 out of 13||3 out of 13|
|BlueSKY Growth Portfolio 5
|Smith & Williamson||8.5%||27.5%|
|Aberdeen Standard Capital||6%||21.6%|
A couple of notes about the above table:
- The returns are net of any other fees and charges (e.g. investment platform and adviser fees). This means that the actual returns received would have been lower when these costs are factored in. Of course, these fees would be payable whether you invested in a BlueSKY portfolio or an MPS.
- The BlueSKY Growth Portfolio 5 is our medium risk portfolio. While the New Model Adviser article isn’t explicit about the risk level that the MPS firms are taking, the article uses a ‘balanced’ index which usually denotes medium risk.
As you can see from the table, the BlueSKY ‘medium risk’ portfolio has fared well against the competitors. The performance achieved has been significantly above the average returns achieved by the managed portfolio services of the various DFMs.
Whilst we don’t often talk about the returns achieved by the BlueSKY portfolios, we believe that it is important for you to know that the ‘investment engine’ that powers your financial plan is working.
Although we can’t control the markets, we have every confidence that the portfolios that we create for our clients will deliver the desired outcomes over the long term.
Get in touch
Our investment approach can demonstrate proven returns when compared to some of the ‘big names’ in the sector. To find out how we can help you, please get in touch. Email firstname.lastname@example.org or call us on 01189 876655.