At last year's Investment Week Specialist Investment Awards, the Embark Horizon Multi-Asset fund range won the award for Best Specialist Risk Targeted Fund/Fund Range.
Here we speak to Thomas Rostron, CEO of Embark Investments, about the management approach on the fund range, the impact of Covid-19, ESG developments and supporting clients.
Can you give a brief overview of the fund range and explain what you are trying to offer investors?
The Horizon Multi-Asset fund range consists of five purpose-built funds designed to match five typical attitudes to risk or risk profiles. Each fund is managed with the aim of remaining within its respective risk profile.
The funds invest in a number of underlying funds which in turn hold a mix of assets including equities, bonds and cash.
The higher the risk profile of the Horizon fund, the higher risk of the underlying funds it invests in, but the greater the opportunity for return.
The Horizon multi-asset funds are designed to be a straightforward solution aligning the right blend of actively managed diversified investments to suit the financial goals of investors matched to the risk they are prepared to take.
What is the three-layered management approach on the fund range and how do you manage risk?
The Horizon Multi-Asset Funds are risk-profiled multi-asset funds with a distinctive risk and investment management approach. The pooling of investment expertise from leading industry experts is what sets them apart in the market.
The investment process includes a unique three-layered management approach. Embark Investments sets and oversees the investment mandates, as the authorised corporate director.
This includes fund objectives, guidelines and risk constraints to ensure that the funds are managed in accordance with the fund objectives and to provide independent governance.
The second layer of the process is to set the strategic asset allocation (SAA) which is reviewed on a quarterly basis. The SAA is provided by EValue, industry leaders in stochastic rules-based portfolio modelling, and is based upon their long-term model utilising pre-approved core asset classes only.
Columbia Threadneedle Investments conduct the third stage, applying a tactical asset allocation overlay to EValue's asset allocations before investing into their underlying funds within pre-identified limits.
Columbia Threadneedle integrate ESG factors in the management of the five funds. Columbia Threadneedle's independent risk team carry out regular analysis to ensure the funds remain within their risk profile.
Additionally, Horizon by Embark undertake portfolio risk management to ensure the funds are run in accordance with the fund objectives. This process provides a balanced approach to managing the funds - removing the risk of institutional bias which can impact fund performance
All five of the Horizon funds have won the FE Five Crown award, have a Defaqto five diamond rating and have featured in FE Fundinfo top quartile in every year bar one fund in one year.
What has helped support performance on the funds, especially in the past year? How have you weathered the fallout from Covid-19?
In 2020, year-to-date as of 30 November, the performance of the Embark Horizon Multi Asset funds has been driven by the strategic asset allocation set by EValue and the tactical asset allocation manged by Columbia Threadneedle, both overseen by Embark Investments.
This three-layer management approach has driven positive contributions across the fund range with a top quartile ranking in all funds from FE.
EValue's strategic asset allocation and Columbia Threadneedle's tactical asset allocation and security selection provided positive impacts across the fund range.
In 2020, Columbia Threadneedle added mostly through tactical asset allocation in the more moderate risk profile and through security selection for the riskier profiles.
The year has been challenging due to the pandemic, which prompted large drops from mid-February to late-March.
Nevertheless, all these losses were recovered throughout the remainder of the year, with fund prices exceeding February highs, whereas the second wave of Covid-19 cases - and the difficulties of the US Congress to agree to a stimulus package - brought a much more moderate drawdown in October.
The subsequent rally was spurred both by news of the vaccines and the resolution of the US election, on the expectations that the Biden administration will bring a return to political orthodoxy, and larger fiscal stimulus ensue.
From an asset class perspective, the fund range added Global Government Bonds to the stable, while Physical Property was excluded.
What is important to you in terms of supporting clients in the funds through effective communication or educational initiatives, for example?
Embark Investments is focused on evolving the Horizon funds to continue to meet client needs and regulatory changes. For instance, we have established an ESG policy statement to enable our customers to understand how the funds are managing their investments in relation to this important and developing topic.
During the upheaval caused by the Covid-19 pandemic, Embark's technology-led approach has enabled us to maintain our service levels to advisers with all functions across the firm transitioning to home working with a high degree of seamlessness.
And, we have continued to deliver regular reports, newsletters, updates and education-based webinars to keep our adviser community up to date with latest events and industry insights, evolving this content in-line with the changing needs of advisers and investors.
Click here to find out more about last year's Specialist Investment Awards.