Schroders launches £4bn UK Investment Solutions business
Schroders has launched a new £4bn UK Investment Solutions arm, which will deliver a series of model portfolios and multi-asset funds.
Alex Funk, who currently manages the Schroder Portfolio suite of multi-manager products, will become the new arm's chief investment officer. He will work alongside Schroders' £169.4bn multi-asset team led by Johanna Kyrklund, as well as alongside a dedicated team of investment analysts.
Schroder Investment Solutions will offer a range of model portfolios to investors spanning three ranges: Active, Strategic Index and Sustainable.
It is not just having the range of different solutions and styles, it is allowing advisers to have full control over risk levels."
Active and Strategic Index will house nine model portfolios each with risk ratings between two and ten, while Sustainable will offer six risk-managed portfolios. Each product will have an annual management charge of 15 basis points.
Gillian Hepburn, intermediary solutions director at Schroders, said the launch follows an uptick in demand from advisers for outsourced multi-asset portfolios, both due to increasing regulatory pressures and a heightened desire from their clients to manage risk.
"Last year, when we conducted our adviser survey, we saw that 32% of advisers who outsource their investments in some way said that they would increase their allocation to multi-asset funds," she told Investment Week.
"One of the things we are really pleased about is that we are bringing to market a full range of risk profiles within each individual segment - it is not just having the range of different solutions and styles, it is allowing advisers to have full control over risk levels.
"Last year, we did see a significant rebound in markets, but I think it gave investors a real wake-up call in terms of their capacity for loss."
Doug Abbott, head of UK intermediary at Schroders, said an increased appetite for both multi-asset and sustainable investment solutions has been prevalent since before the pandemic.
While he believes 2020 has served to heighten demand for both areas of the market - and a combination of the two - he said the launch of Schroder Investment Solutions has been in the pipeline "for a couple of years".
In terms of the new business' Sustainable range of managed portfolios, Abbott explained it will utilise Schroders' SustainEx tool, which measures the costs and benefits companies would face if their negative and positive externalities were priced in.
"We have the benefit of working really closely with the ESG team at Schroders; Alex Funk and his team are able to draw on a huge amount of proprietary tools that assess fund managers and investments on their sustainable credentials," he said.
"We have our award-winning SustainEx tool which uses data from a whole variety of sources and assesses impact and risks at a granular level. But we also analyse funds on a monthly basis in a broader sense in terms of whether they are meeting our investment goals.
"We firstly use screening to monitor any exposure to alcohol, tobacco or fossil fuels, for example; then we look at ESG integration in terms of holdings' contributions towards sustainable investing; then we factor in impact investing and SDGs [UN Sustainable Development Goals]."
Alongside Schroder Investment Solutions' 24-strong range of model portfolios, it will also offer two ranges of multi-asset funds - the Schroder Tactical Portfolios and the Schroder Blended Portfolios.
The six funds managed under the former will all be capped at a charge of 29 basis points, and will also invest in Schroders funds traditionally unavailable to retail investors, such as their range of systematic Multi Factor Equity funds. It will also hold ETFs and have exposure to futures, where appropriate.
The five-strong stable of Blended Portfolios, which in aggregate are described as a "whole of market" solution, will comprise Funk's rebranded Schroder Portfolios, all of which will be risk-aligned and adopt a tactical approach to asset allocation.
While Schroders will continue to run its range of multi-asset funds such as Diversified Growth and Dynamic Multi Asset, Abbott said the key differentiator between these and the Schroder Blended Portfolios is that they are risk-rated and offered under a broader investment solutions umbrella.
"Our other multi-asset funds, which do a great job, are more standalone," the head of UK intermediary explained. "The key is to view these new propositions as a range rather than some separate funds.
"The idea is that financial advisers now have a product range under one banner which offers a very broad range of capabilities they can use for their clients, all of which are at an attractive pricing point.
"It is really clear that, if you look at the trends in the market and survey data, advisers are telling us this is exactly what they are looking for. Schroders Investment Solutions is set up to essentially give advisers all of those capabilities from a very strong and well-recognised fund house."
Both the business' MPS range and multi-asset portfolios will incorporate fund research from Rayner Spencer Mills when finding the "best of breed" vehicles to hold across its products. Exposure to Schroders' own funds will be capped at 20%.
"What is really important is that we are not just trying to sell solutions consisting of Schroders funds - it is very much a best of breed approach," Hepburn added.
"What advisers are getting is the Investment Solutions team picking the best funds in the market, using a huge range of tools and expertise."
First published by our sister title Investment Week
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