Proving that value for money has clearly become a watchword for wealth managers, Whitechurch Securities has become the latest to slash the charges on its managed portfolio service (MPS).
The Bristol-based firm has cut the annual management fee on its Dynamic portfolios to as low as 0.1% for direct clients, and 0.2% for customers using external platforms. It had previously charged 0.35% across the board. This takes ongoing charges to 0.4% to 0.6%.
Now the price is set, how is Whitechurch proving it provides value?
To keep fees low, the MPS predominantly invests in passives, although Whitechurch has the flexibility to hold up to 20% in active funds.
‘It is really for advisers who are looking for a very low-cost solution; however, we do not want to rely purely on passive investment,’ said managing director Gavin Haynes (pictured).
‘With increasingly onerous costs and regulatory requirements involved with running advisory portfolios in a Mifid II environment, I believe that the marketplace for risk-rated model DFM portfolios will continue to grow, particularly for smaller investments.’
He added: ‘The Dynamic portfolios can be an attractive alternative to multi-manager funds, as these are priced at a fraction of the cost of many popular funds.’
Over five years, the Dynamic Balanced portfolio is up 32.7%, beating its ARC £ Balanced Asset PCI benchmark, which rose 22.5% over the same period.
Asset allocation decisions
The most recent asset allocation change has seen Haynes (pictured) add to his UK commercial property exposure.
‘One of the things we have done recently is continuing to add a little bit to UK commercial property as a diversifier. This is an area we exited around the time of the EU referendum, but we re-introduced it back into the portfolio in the summer,’ he said.
Haynes added that besides diversification, property also offers an attractive level of income, as well as the potential for modest capital growth.
The position has been paying off, with the Janus Henderson UK Property fund the portfolio’s best performing holding over the first quarter, up 1.7%.
In recent weeks, Haynes has also started to build exposure to US Treasuries.
‘There are two key reasons for this – as yields approach 3%, we think that actually starts to make them look attractive in terms of developed markets. The US is now one of, or probably the only, the markets where government bonds are yielding much more than the equity market.’
Haynes noted Treasuries also offer a degree of protection if investors go into risk-off mode. This exposure additionally adds a counterweight to the portfolios’ underweight to US equities.
‘So holding those Treasuries provides us with a bit of dollar exposure as well, which makes sense as a good diversifier.’
It is very much about valuations in the US for Haynes, but he appreciates that in the short term, tax cuts could certainly provide what he describes as a ‘sugar rush’ for the economy.
‘However, generally, we just feel that the valuations look a bit stretched and our contrarian approach has seen us focusing more on bringing a bit back to the UK.’
Describing the country as ‘unloved’, he has been building exposure to UK equities, including through equity income funds.
Regardless of how Brexit pans out, Haynes highlights that either way, the FTSE 100 derives north of 80% of its earnings from overseas, with companies being net beneficiaries of sterling weakness.
Conversely, if Brexit goes well, he feels that more domestically-focused smaller and medium-sized companies could also prosper.
Despite his optimism about the UK economy, the worst performing holding in the fund over the last quarter was the Vanguard FTSE UK Equity Income index fund, as it fell by 6.7%.
Haynes explained: ‘Although we acknowledge the political risks, we believe that there is currently a very gloomy scenario priced into the UK stock market and this could represent a good contrarian opportunity.
He noted the Vanguard fund is focused on blue chips offering an attractive yield, and he believes that, on a relative basis, the market offers value.