Many of your clients have been well served by deposit-based investments in recent years. In 2011, in the midst of the financial crisis, banks were paying high interest rates to secure capital. Credit risk increased but clients were being offered in excess of 5% a year for 5-year deposit products. These offers were very popular with pension clients in particular.
These deposit products are reaching maturity and times are very different now. Following the economic downturn, conservatism amongst investors remains high but low interest rates have seen investors take on some risk to seek stronger returns. Magnet Cautious and Compass Cautious are European Securities Market Authority (ESMA) 3 rated portfolio funds that are attracting a lot of interest as they aim to limit exposure to risk. 2016 saw over 50% of inflows to our portfolio funds go in to ESMA 3 funds.
Magnet and Compass Cautious are part of our portfolio fund range. Within our portfolio funds we use a multi-asset, multi-strategy and multi-manager approach which aims to capture most of market upside but limit downside.
The interest in these funds is not only due to their low – medium level of exposure to risk but also due to the high performance amongst their peer group. In the 3 years to 17th February 2017 our Cautious Funds have outperformed all competing funds to come out on top.
The funds have bespoke risk control aims with explicit objectives. The funds twin objectives are to:
maximise returns, and
keep its 5 year annualised volatility within a range of 2% to 5% a year.
Who are these investments suited to?
Friends First were the first company to introduce multi-asset portfolio funds into Ireland when we launched the Magnet Portfolio 10 years ago in 2007. In 2013, we expanded our range to specifically include ‘Cautious’ funds; low to medium risk portfolio funds with the ESMA risk rating of 3. These funds were introduced as a direct response to customer and broker demand for funds designed for the investor with a lower tolerance to risk.