Demand from financial advisers is driving discretionary fund managers to create more funds of funds of unregulated collective investment schemes (UCIS), says boutique asset manager Connaught.
With independent financial advisers facing challenges such as preparing for the retail distribution review (RDR) and delivering the returns desired by clients in the midst of global economic uncertainty, outsourcing to discretionary fund managers to benefit from their due diligence on specialist funds can be an effective option, said Connaught.
Due to low correlation with equity or fixed-income portfolios, the use of specialist investment vehicles such as UCIS funds is thought to provide diversification as well as offering a well defined expected return profile.
Connaught director Alistair Mawdsley said discretionary fund managers “must consider diversifying their asset allocation by offering fund of funds of UCIS funds within their portfolios in order to help provide new opportunities and the potential for higher returns”.
He added that “offering a basket of UCIS… can manage overall risk and help develop investment in areas which are completely separate to the client’s core portfolio”.
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