L&G looks at risk-rating multi-manager range

15 June 2012 | By Joanne Ellul

It is the latest firm to look at risk-profiling its funds. Schroders says it is considering risk-rating some managed funds while Allianz and Investec have launched risk-targeted funds.

L&G Investments managing director Simon Ellis says the firm is trying to find a way to incorporate its portfolio planning tool into the risk process.

He says: “We are looking at risk-rating the managed funds but we would only do it if we can integrate the portfolio planning tool on the platform with the risk process within the funds.”

Ellis says the sensible way to do this is to have a process that uses the portfolio planning tool to identity clients’ risk tolerance, then match that to certain risk buckets and to relevant funds. (article continues below)

He adds: “It is also important that there are not many risk buckets so the chances of clients drifting from one bucket to another is not too high.”

Last month, Allianz and Seven Investment Management called for a separate Investment Management Association sector for risk-profiled funds but the IMA has quashed the idea.

IMA head of communications Mona Patel says: “Our sector classification scheme is not a risk-rating scheme and so we would never create a sector that was based on risk-ratings. The natural home for risk-rated funds is the managed sectors because they are defined by the different assets they hold.”

Skerritt Consultants head of investments Andrew Merricks agrees with the IMA.

He says: “If a separate sector was created, there would be a danger that investors and advisers would assume the funds within them were meeting particular risk targets.

“It is down to the adviser to determine whether funds actually match the risk-rating they have been given and are suitable for clients.”

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