An interview with Robert Corbally, investments product manager
Why should advisers look to outsource investment decisions?
It is virtually impossible for financial advisers to keep on top of everything, particularly when there is stock market volatility and constant regulatory changes, as well as issues such as the credit crunch, a soaring oil price and talk of a recession.
Against that backdrop it makes sense to let someone else make decisions such as: Where should we be invested? How much should be put into different markets? When should we take profits and when should we move around?
Many advisers are now coming to the conclusion that they cannot be all things to all clients and are turning to external groups to help improve their offering. Outsourcing non-core areas enables them to focus more attention on their own specialist areas.
In what ways can Prudential help?
We have a long history of working with advisory firms to understand their business challenges and create opportunities to deliver profitable growth. By going with a recognised name you can be assured of providing the best quality service to your clients by handing investment decisions over to specialists in the field.
We have been looking after people's money since the 1800s so have the combination of technique, expertise, experience and track record - coupled with the flexibility and breadth within portfolios - to deliver the investment goals required.
Why did Prudential enter the collectives market?
It was really a case of taking the core investment expertise that we already had in place and making it more widely available. If people like what we do then they can now buy straight into the story - instead of having to access it via a wrapper.
As part of this focus, we launched two new funds for lower to medium risk clients just over a year ago. Taking advantage of the full flexibility offered by Nurs, they enable us to play to our strengths through building risk controlled diversified portfolios.
Although we have always participated in this market to some degree, it has been over the last year that we have really been active in packaging up this expertise in the shape of funds that can be offered to the market.
Can you tell us more about the two funds in the range?
The aim of the Prudential Managed Defensive Fund is to provide a high degree of capital preservation - while also targeting a return in excess of cash - which is a requirement for many investors. The portfolio offers exposure to a diversified range of assets and may be suitable for someone looking for a lower to medium risk home for all their money, or a stable core for their overall investment portfolio.
The fund's core long-term assets are bonds, mainly Gilts and UK Corporates, with a small exposure to equities and alternative assets. However, the manager can utilise shorter-term 'tactical' asset allocation moves in order to add value in a risk controlled way and this flexibility is extremely useful.
Currently, it has 27% held within Investment Grade corporate bonds, 24% in UK Government bonds and nine per cent in non-UK government bonds. Elsewhere, 11% each is in property and equities, while smaller amounts are invested in high yield corporate bonds, leveraged loans, hedge funds and alternatives.
The Cautious Managed Growth Fund, meanwhile, aims to deliver long-term return - and by that we mean a combination of income and growth of capital - by investing in funds and collective investment schemes managed by the Prudential Group. It is designed to target an absolute return that is significantly higher than inflation over a three to five year period.
Global equities, bonds and property are the fund's core long-term assets, along with a small exposure to alternative assets. Once again, shorter term 'tactical' asset allocation moves can be made if required.
At present, the fund has around 57% in equities - with UK and European names being particularly favoured, 18% in government bonds and nine per cent in property. The remainder is made up of investment grade corporate bonds, alternatives, cash and high yield corporate bonds, as well as some infrastructure related projects.
While the Prudential Managed Defensive Fund is focused on preserving capital and looking to beat cash, the Cautious Managed Growth Fund looks to grow an investor's spending power in a risk-controlled manner.
How can these funds be accessed?
They are available across most of Prudential's investment range, including being eligible as an ISA, as well on popular platforms such as Transact, Cofunds and FundsNetwork. In addition, the Prudential Cautious Managed Growth Fund is now available on the Prudential Flexible Retirement Plan.
Why is now the right time to take a more cautious approach?
There is a lot of uncertainty around in the markets so people are generally taking a more defensive stance with their money. Now is a good time to be positioned this way, but it is important to point out that a cautious investment will always have a place as a core holding for investors.
Our multi-asset style of investing works through all market conditions, and in an investment environment such as the one we are experiencing now it will tend to get noticed more than usual.
The focus is really on building up a long-term savings portfolio and reducing the high risk exposure. Our funds are aiming neither to shoot the lights out - nor end up shooting themselves in the foot.
How much flexibility do the funds enjoy?
It is not simply a case of diversifying between UK equities and UK bonds as the portfolio manager can take advantage of opportunities anywhere around the world. The Prudential Cautious Managed Growth Fund, for example, is invested across the UK, Europe, Asia and the United States. Making the correct asset allocation calls boils down to not only considering what asset classes to invest in, but also which markets look the most attractive.
Why should advisers choose Prudential?
We think there are five main reasons: Our unique approach to investing; the fact we invest without constraints; giving clients the ability to access our expertise; helping treat advisers' customers fairly; and having products that are easy to invest in. We are also rated AA+ by independent credit rating agency Standard & Poor's. This means we are financially strong, which gives us more freedom in choosing where to invest.
Can you explain this 'unique approach' to investing?
Advisers are able to tap into the expertise of our Portfolio Management Group - made up of economists, investment strategists, mathematicians and analysts - that makes asset allocation decisions.
The PMG have overall responsibility for moulding the right investment strategy for Prudential's multi-asset funds, looking at the longer term strategic allocation mix and implementing shorter term tactical asset allocation decisions, as well as ongoing monitoring of the performance and risk of the underlying holdings.
What would constitute success in Prudential's book?
Success as far as our involvement in collectives is concerned would be to take our well honed investment style into the cautious managed space and not only be recognised as a serious and significant participant in this area, but as the primary option for anyone who is looking to invest in this type of product.
Have you got a final message for advisers?
We are convinced that we offer a compelling investment proposition for both financial advisers and their clients. Not only have we got a solution to suit a variety of investor's needs, but investing with a company that has been looking after other people's money so successfully for more than 120 years should enable everyone to rest easy knowing that their savings are in safe hands.
