ETF Report UK: Adviser Profile

January 16, 2015

Investment Approach

One of the firm's first moves on launching was to trademark its portfolio brand name: the iBasket. This is, in short, a basket full of ETFs. The firm's Balanced Real Return iBasket has a one-year track record with returns of 9.4 percent. 

It has also recently launched a Country Rotation iBasket with Societe Generale and runs Bespoke iBaskets for investors who know what they want. 

The approach that Twenty20 takes to investing is systematic and research driven, not the star manager approach. It also runs an open architecture policy, which means that it is not tied to a single provider, meaning that the firm can use a range of different ETFs. 

"Chasing returns is understandable, but often leads to disappointment. The macro economy, and the inevitable investment cycles that come with it are a hallmark of the way the world really works. 

"It means that investors should remember the idiosyncratic factors such as wars, political inference in the markets and the not so invisible hand of regulation, and is why we should accept why investing will be forever unpredictable. In the end though, this is where skill is required and results in that rare quantity called alpha," Lane noted. The firm considers itself to take an actively managed approach to passive ETF portfolios. The portfolios are graded into different risk categories, which include cautious, balanced, growth and adventurous. 

"There are 5,400 ETFs globally, but choosing from that many is difficult. We perform our own cluster analysis, which breaks the ETFs into groups and we then whittle this down to 200 ETFs, putting these into subcategories based on a scoring system and risk. Once the portfolios are up and running, they are then rebalanced monthly. 

"In terms of cost, we do like lower TERs, but at the core, everyone is competing on price, and credibility in the asset class is something we deem more important," said Lane. "We are then left with a list of ETFs from which we can build portfolios based on the investor's theme."


 

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