CHRISTMAS OFFER Subscribe to Essex Life today CLICK HERE

Promotional feature: Are you paying more for a lower investment return?

PUBLISHED: 15:08 10 October 2014 | UPDATED: 15:08 10 October 2014

Are you paying more for a lower investment return?

Are you paying more for a lower investment return?


With a recent report suggesting a basic asset allocation model has out-performed most discretionary managers, finance expert Neil Hewitt from Scrutton Bland offers his advice

When compared to the performance of a basic asset allocation model, most discretionary investment managers have under-performed in the past three years, according to a report from the Asset Risk Consultants (ARC).

The report has revealed that an investor who had passively followed the FTSE APCIMS indices — a range of wealth management indices — would have ended up in the top 10% of discretionary managers in terms of performance in the past three years.

The FTSE APCIMS indices are designed as a strategic benchmark for wealth management portfolios. They are decided by a committee that sets and picks indices for the asset allocation, so the Balanced index has 42.5% in UK Equities, represented by the FTSE All-Share index, for example.

The report said the reasons for much of this under-performance were, ‘an over-cautious stance with respect to equity markets and a lack of exposure to UK Government bonds’.

ARC said that, ‘In the aftermath of the financial market crisis in 2008, with the benefit of hindsight, private client discretionary managers placed too much emphasis on capital preservation strategies, thereby capturing only part of the “relief” rally’.

These figures are very worrying and they show there needs to be far more transparency over discretionary management performance. At Scrutton Bland we are not surprised by the figures due to the charges incurred by active management that will drag on performance.

A More Effective Approach

A more effective approach is a passive portfolio with an appropriate asset allocation. Here, the portfolio will still have a diversified approach with exposure to the various asset classes and sectors, but will do so through index tracking funds. These funds will provide the market return without the risk of under-performing the market (other than minor tracking error) at normally much lower cost.

However, care still needs to be applied here and advice should be sought, as not all passive funds are the same. Recent research shows that some passive funds (which include some large household names) carry ‘highly uncompetitive’ charges.

The research showed annual expenses for some passive funds vary unbelievably between 0.15% to 1.5% per annum. The higher end of this scale is not offering good value for money. High expenses are not necessary and charges really should not exceed 0.5% per annum. Indeed, on our model portfolio the charges range from 0.21% to 0.25%.

Interestingly, the Government is consulting on moving the £180bn Local Government Pension Scheme from an active to a passive approach with estimated annual cost savings of £420m per year. Passive investment strategies have increased in popularity in recent years with overall shares in funds at an all time high. n

If you would like to arrange an initial meeting, without obligation, please contact 01473 259201 or email

Scrutton Bland Limited is authorised and regulated by the Financial Conduct Authority.


Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files

Please log in to leave a comment and share your views with other Essex Life visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by Essex Life staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique Essex Life account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

More from Essex Life

Tue, 12:54

The agricultural heritage of the county cannot be underestimated. Here Stephanie Mackentyre visits three farms that have been feeding Essex for generations

Read more
Tue, 12:23

Laurie Page of the Public Rights of Way Team at Essex County Council shares with us this beautiful six-mile walk around Bradwell’s stunning coastal delights

Read more
Tue, 10:07

As an enduring British institution, it’s incredibly important to get your Sunday lunch right. Here are 12 pubs in Essex that know how to deliver precisely what you require.

Read more
Mon, 12:47

For those still figuring out how to spend your Friday through Sunday, we’ve rounded up 5 of Essex’s best things to do to ensure no second of your weekend is wasted

Read more
Friday, October 12, 2018

Over the October half term Essex will be filled with spooky events that’ll be sure to put you in the ideal mood for Halloween. Here are 15 great places for kids and adults alike

Read more
Wednesday, October 10, 2018

We’ve put together 15 questions that will push your knowledge of Essex to the limit - let us know how you’ve done on social media!

Read more
Tuesday, October 9, 2018

Paycocke’s House and Gardens, now owned by The National Trust, is one of the county’s most precious historic sites and 2018 marks 500 years since the death of the man who gave the house its name. Ruth McKegney tells the tale of this Coggeshall jewel

Read more
Tuesday, October 9, 2018

The Essex Life Food & Drink Awards for 2018 took place on September 27th at Down Hall Hotel

Read more
Tuesday, October 9, 2018

Treat yourself to a pint of real ale surrounded by fresh sea air and coastal views at any one of these 12 glorious Essex pubs

Read more
Friday, October 5, 2018

With one of the warmest and driest summers on record, this year has been a difficult one for gardeners. Susie Bulman from The Beth Chatto Gardens at Elmstead Market shares some top tips for plant survival, even in these conditions

Read more

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy

Follow us on Twitter

Like us on Facebook

Topics of Interest

Food and Drink Directory

Local Business Directory

Search For a Car In Your Area

Property Search