Zenith to defy investor trends
Zenith Investment Partners has added two new products to its diversified funds recommended list despite its annual review revealing investors continue to show little interest in the sector.
The boutique investment research provider added ColonialFirstState’s Whole Enhanced Yield and Merrill Lynch’s Wholesale Balanced Fund to a list of nine recommended diversified funds.
Zenith’s senior investment analyst Ben Davis said since the group’s initial review of diversified funds in 2006, the trend of investors preferring to control the manager selection and asset allocation functions of their portfolio has continued. Davis said this hasn’t helped lift demand for diversified fund offerings.
He said the trend has also been strengthened with the delivery of strong investment performance from most growth sectors, which has reduced the attraction of actively managed asset allocation approaches. In particular, single manager diversified funds have continued to experience outflows.
“Despite these concerns regarding both single and multi-manager options, we believe there is a definite place for diversified funds, especially for those clients with small investment amounts,” Davis said.
“Diversified funds represent low maintenance investments whereby asset allocations do not need to be rebalanced and ongoing strategy selection and monitoring is actively managed. This can represent a cost effective diversified investment solution for these types of clients/investors.”
Davis said based on the options available on the major wrap platforms, Zenith believes there is “a limited number of compelling options” for investors to invest in that have a strong track record in strategic and/or tactical asset allocation and a continuing focus on innovation and ability to change with the times. He said the managers with traditional diversified approaches that display these characteristics are UBS, Perpetual, Schroders and BlackRock.
However, Zenith believes these few investment managers that have re-focused and/or re-engineered their diversified products range are in the best position to benefit should there be a change in investor preferences in favour of diversified funds.
“The Merrill Lynch Global Allocation Fund (offered by BlackRock Investment Managers), the Select Defensive and Growth Portfolios and the CFS Enhanced Yield Fund are innovative and unique new products that we believe particularly appeal to a broad range of investors,” Davis said.
“We believe these funds are better positioned to protect performance in downward markets and provide a smoother return profile relative to most traditional diversified funds.”
Zenith placed nine products on its recommended list from an initial universe list of more than 100 funds.
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