Press
Investment Adviser Article June 08
Marlborough turns its focus to ETFs
- Story by: Nick Rice
- Magazine: InvestmentAdviser
- Published Monday , June 23, 2008
Marlborough Fund Managers is launching an Oeic of four funds investing purely in ETFs for the retail marketplace, following robust demand for the asset class.
The Oeic will contain four quantitatively managed portfolios of ETFs that specialist manager iFunds has been running for almost two years, primarily for private clients and iFunds' own assets.
iFunds will continue to manage them with the oversight of investment director Nigel Baynes, while Marlborough will handle the distribution.
The UK-domiciled offerings will take on the Marlborough brand and the names ETF Commodity, ETF Absolute Return, ETF Global Growth and ETF Global Income. iFunds will benchmark ETF Commodity against the Reuters/Jefferies-CRB index, ETF Absolute Return against cash plus 200 basis points and the ETF Global products against the MSCI World index.
The ETF Commodity fund invests 15-35 per cent of its assets in broad commodity ETFs. It can then invest in a range of commodity sector indices, with up to 60 per cent in a single index, and in any number of individual commodities, with a maximum of 25 per cent in each one.
Stacey Ash, investment manager at iFunds, said the ETF Absolute Return fund could invest anywhere in the available ETF universe. But he added it was a much lower-risk vehicle and, like the other four funds, could short to manage its exposure. "It has a corporate bond-type risk mandate, but is uncorrelated to them," he said.
He said the global funds were higher risk than the Absolute Return fund. "We select the countries and economic zones that have the best risk/return profile." The Global Income fund focuses on dividend-based indices, however.
The minimum investment in the four funds is £10,000 on the B share class and £1000 on the A class. Initial charges are 0.5 per cent on the B class, 5 per cent on the Commodity and Global Growth A class, and 4.5 per cent on the Absolute Return and Global Income A class.
AMCs are 1.75 per cent on Commodity and Global Growth A shares and 1.5 per cent on Absolute Return and Global Income A shares with a 0.5 per cent trail commission. Commodity and Global Growth TERs are 2.2 per cent, the Global Income TER is 2 per cent and the Absolute Return TER is 1.8 per cent. The B share AMCs and TERs are identical, but minus the trail.
Marlborough intends to distribute the fund on major platforms, including Cofunds, where it will go live on 1 July.
Darius McDermott, managing director at Chelsea Financial Services, said the arrangement was a win-win for both sides. "For Marlborough, it's a sensible diversification of their product range. From iFunds' point of view, it's good to do a deal with Marlborough."
He described the ETF Commodity portfolio in particular as a "welcome addition" to the active onshore commodity universe, although he expressed slight reservations about its charges. "They are not cheap given the underlying instruments are ETFs."
ETFs have been gaining ground with investors in recent months, recording net positive fund flows over the year to May, while actively managed funds and trackers both recorded net outflows, according to Lipper Feri.
The average passive fund, meanwhile, has outperformed the average actively managed fund over one year across a wide number of sectors, including UK All Companies, Europe ex UK, North America, Asia Pacific ex Japan, and Japan.
Richard Ramyar, Lipper's head of research in the UK, said this was often the case in bear markets.
"Managers tend to be rewarded for their bets during positive times and punished when bets go amiss in negative times," he explained.
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