Financial advisers should consider recommending a single balanced fund to clients as a core allocation within portfolios so they may benefit from any asset allocation decision immediately, according to Schroders Investment Management Australia.
“If you’re an adviser and you have 100 clients and you put all those 100 clients into a single manager balanced fund, then every asset allocation change that’s made in the balanced fund flows through to every client from day one,” Schroders fixed income and multi-asset head Simon Doyle said.
“If you’re an adviser running a discretionary model portfolio for each client, by the time you sit down and do your statement of advice and communicate with them and you change the asset weight within the portfolio, it can take quite a long time for those asset allocation changes to flow through your client base.
“So the big advantage of balanced funds that are properly run is you get any stock selection and asset allocation shifts implemented immediately and that flows across your client base.”
Doyle manages the Schroder Balanced Fund, which returned 7.77 per cent in the 12 months to September 2009, making it the top performer within Morningstar’s multi-sector growth category. There were 43 funds that had one-year performance figures in Morningstar’s multi-sector growth category.
The Schroder Balanced Fund is currently overweight on corporate bonds and neutral on Australian and global stocks, alternatives and government debt. It has zero allocation towards property.
Doyle said there were advantages to using single manager balanced funds versus using multi-manager peers.
“The benefit of using internal managers like Schroders does is the fact that I have complete transparency, I know each security that’s in all those portfolios and I know all the managers,” he said.
“But I’d highlight that I am not compelled to use any particular internal strategy and have the flexibility to change as appropriate. Fortunately, most of our internal funds have performed strongly and this has been an important additional source of return for our clients.”
