Low interest rates and a spike in inflation have increased demand for innovative ways to grow clients’ money over the long term.
Inflation in the UK rose to 3.1% in the 12 months to September and is forecast to rise above 4% in 2022, well above the Bank of England’s 2% target. At the same time, interest rates remain at an all-time low, meaning returns on government bonds and cash savings accounts are often below inflation.
The result has been a flight to equities, which have performed strongly over the past year despite the challenges of the pandemic. Several indices hit record highs in 2021 as government stimulus measures, pent-up demand and the successful vaccine roll out led to global economic growth. As of 27 October, the S&P 500 had gained an impressive 34% from a year ago.
Source: Refinitiv Datastream
Economic growth in the US, the UK and the eurozone is expected to moderate at different points over the coming months, yet the economic and policy backdrop remains positive for equities. Central banks are yet to rein in their highly accommodative monetary policies, the labour market continues to improve, and there is strong corporate profit growth.
Capturing stock market growth
Against this backdrop, we are seeing heightened demand from advisers for high-quality solutions that capture the stock market’s growth potential for their clients. In particular, advisers have requested a fund that plays to the more ‘risk-on’ environment that is currently prevalent in the funds space.
To meet this demand, we have added a sixth fund to our risk-controlled MI Brewin Dolphin Voyager Fund range. Launched in the autumn, Voyager Max 100% Equity aims to maximise returns by investing almost entirely in equities. The fund is diversified across international and UK equities to ensure clients gain exposure to each region’s growth opportunities, as well across different sectors and styles.
Voyager Max 100% Equity mirrors our established Managed Portfolio Service (MPS) Global Equity model portfolio. So, while the fund is new, the investment approach behind it is well established.
Several of the major indices have been on an impressive growth trajectory over the past 12 months but the journey has been far from smooth, with large swings from one day to the next. For clients with pure equity exposure, being able to react quickly and decisively is especially important in the current market environment.
Like the other five funds in the range, Voyager Max 100% Equity employs a dynamic asset allocation process and our Asset Allocation Committee ensures we position the fund for the prevailing economic conditions. However, once the asset allocation has been set, we have the flexibility to adjust the fund’s tactical stance to react to market movements.
Each year, we review the benchmarks and asset allocation we use for each fund to ensure we maintain our track record of consistent, solid performance against each fund’s benchmark and peers.
Our Voyager Funds were launched one year ago and, by the middle of 2021, had already built up £260m in funds under management. They essentially put a fund wrapper around our established MPS portfolios and were launched in response to adviser demand for more choice and to extend opportunities to invest to more clients. Each fund is managed by the team who are behind MPS, using the same proven process. The funds are tailored to meet the specific risk profiles of clients, via a range of equity exposures from 40% right up to 100% with the most recent launch. Our aim is to help advisers cater to each client’s individual life story through an independent structure that harnesses the cost-saving advantages of our ‘manager of managers’ approach.
No-one knows exactly what is around the corner, but with the risk-on environment expected to continue for the foreseeable future, advisers have another powerful tool in their armoury when it comes to finding long-term growth opportunities for clients.
This is for FCA authorised individuals only and should not be distributed in whole or part to retail clients.
The value of investments, and any income from them, can fall and you may get back less than you invested.
Neither simulated nor actual past performance are reliable indicators of future performance.
Performance is quoted before charges which will reduce illustrated performance. Investment values may increase or decrease as a result of currency fluctuations.
Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.