Determining what targets to set for your clients
Introduction by Charlotte Richards
One route many advisers are taking at the moment is the
multi-asset one, particularly risk-rated or risk-targeted funds. They both do exactly what they say on the tin; one type will have a rating (usually one to seven) of how low or high the risk levels are based on historic data, and the other specifically targets a risk level and is forward-looking.
While there are no set parameters of how to define the risk, each fund management group will have its own definition of how to rate a fund, and which rating provider it uses, be it Defaqto, Dynamic Planner and the like.
Because of the lack of parameters and clear definition of what constitutes a risk-rated or targeted fund, there can be some confusion when initially picking one. It is not as clear-cut as picking an Investment Association sector and analysing it.
Many sectors have both risk-rated and risk-targeted funds. The majority of them will sit in the IA Mixed Investment and Flexible sectors. Just last year, the IA launched its new Volatility Managed sector, in response to the growing popularity of outcome-focused funds available to investors. These funds have no one particular investor suited to them; the idea is the range of funds will be designed for a multitude of investor types.
This supplement will give an overview of risk-targeted funds in a series of features, looking at the differences between them and risk-rated funds, how asset allocation changes with risk in mind, and how portfolios can be managed in times of market volatility. There is also a fund manager profile on Invesco chief investment officer Nick Mustoe, who with more than 30 years’ investment management experience under his belt, manages its Summit range of funds.
Invesco fund range under the spotlight
Invesco fund manager profile
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Changing views of asset
Deciding on the right funds for clients can be difficult for any adviser, but having a set of funds that are specifically designed for certain appetites can make fund-picking one step easier. In a basic fact find, you will learn if your client is of an adventurous, balanced or cautious nature. From there, it will narrow down the thousands of funds available which will be the right choice for them.
Features + Contributors
Choosing the right product for your clients
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A spotlight on risk-targeted funds