Tilney set to launch smart beta range of funds

Dec 4th, 2015 | By | Category: ETF and Index News

Tilney, a UK-based investment manager, is set to reveal its intention to launch a new range of smart beta funds. These risk-graded, multi-asset funds aim to provide a lower cost investment solution with the potential to outperform traditional passive indices.

Tilney set to launch smart beta range of funds

The new range of OEIC funds from Tilney will provide smart beta exposure for UK investors through investing in products such as ETFs.

The funds will combine an active asset allocation overlay with investment through the next generation of passive funds, smart beta. This strategy will include investing in exchange traded funds (ETFs). The range is expected to launch in the first quarter of 2016, subject to FCA approval.

Tilney says the range will be designed to meet growing demand from financial advisers for lower cost investment solutions but without the inherent limitations of deploying solely through traditional passive strategies.

Miles Robinson, Head of Tilney for Intermediaries, commented: “There’s a clear increase in demand from advisers for lower cost investment solutions, but many advisers also recognise there are significant drawbacks with traditional passive products, which leave their clients’ assets fully exposed to the risks of valuation bubbles and also losses in overall market downturns.”

Traditional index-tracking strategies weight exposure to individual securities solely on market capitalisation, which by definition does not distinguish between overvalued and undervalued companies. Smart beta strategies use alternative weighting methodologies which provide a greater exposure to companies exhibiting characteristics such as value, low volatility and momentum. These factors have traditionally outperformed market capitalisation weighted benchmarks over the long-term.

Robinson added: “In developing an innovative solution for financial advisers, we plan to combine the same discipline and successful approach to active asset allocation which has proven successful with the existing Multi-Asset Portfolio fund range, with investment selection that makes use of the ‘next-generation’ of passive investment strategies. Use of these strategies will enable us to better reflect our thematic views, while mitigating the costs and uncertainties associated with selection of actively managed funds. The portfolios will represent an evolution in the market from the plethora of traditional passive-only, multi-asset funds.”

A rational implementation strategy for the fund range would be through the use of smart beta ETFs which are provided by issuers such as iShares, Lyxor, UBS, WisdomTree and Invesco Powershares. The transparent and rules-based nature of smart beta strategies has made them an ideal candidate for the ETF wrapper. Global net inflows into ETFs support this with £53.7bn of assets being gathered by smart beta ETFs in the first 10 months of 2015 alone, according to industry consultant ETFGI.

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