Top fund managers to run IFA funds

Foster Denovo is launching an investment company, Sequel, in a joint venture with Allium Capital. Sequel will initially launch three unit trusts: The SA Sequel Cautious Strategy, managed by David Vickers of Sarasin & Partners; the SA Balanced Strategy managed by Schroders’ Andrew Yeadon and the SA Sequel Adventurous Strategy, run by Henderson’s head of equities Bill McQuaker.

The cautious fund targets cash plus 2 per cent; the balanced fund cash plus 3.5 per cent and the adventurous fund cash plus 5 per cent net of all charges. The funds will be run on a multi-asset, multi-manager basis with the freedom to move across asset classes including alternatives such as property, commodities and hedge funds. They will also be able to move into lower cost vehicles such as Exchange Traded Funds (ETFs) to save costs in slower markets.

The funds will have access to institutional fund pricing in order to keep overall costs down. Each fund has an annual management charge of 0.85 per cent and an initial charge of up to 1 per cent, with a total expense ratio of 1.7 per cent for the cautious fund, 1.75 per cent for the balanced fund and 1.8 per cent for the adventurous fund.

Foster Denovo said the advantage in having its own funds is that if the managers do not meet their targets and stick to their risk profile they can be removed from the fund – rather than having to move the client’s money to another fund. This avoids reinvestment charges and a possible tax liability.

The funds will be run along the lines of an Australian model where by each investor is treated more like a segregated mandate. The Sequel funds are SMARTfunds – a unit trust which uses SMARTfund Administration as the FSA authorised fund operator. This relatively new concept in the UK, which for example, allows clients to view all the underlying holdings in their portfolio, get a valuation and see the charges which have been made to the fund over time - similar to the service private wealth manager clients get. 

Client also negotiate the advice charges separately with their adviser. Denovo said its funds provides greater transparency than many existing retail products and fit well with requirements set out in the FSA’s retail distribution review.

Allium Capital, a consultancy launched earlier this year by former Octopus Investments directors Ronan Kearney and Toby Denne, expects to launch another two such ventures by year end. While at Octopus Kearney and Denne set up a range of funds along this model for Omnis, which is majority owned by IFA network Openwork.