Tilney Turns To Smart Beta To Lure Advisers

Discretionary fund manager (DFM) Tilney is set to launch a range of multi-asset funds that contain smart beta, passive vehicles in order to offer advisers a new, low cost solution.

Currently subject to approval from the Financial Conduct Authority, the fund range from Tilney will be risk-graded and low cost, with active asset allocation. The passive funds underneath the wrapper will be smart beta, i.e. passive funds that do not weight their investments by market capitalisation, but that concentrate on other factors like book value, dividends, earnings and cash flow to capture returns.

According to a release from Tilney, a traditional market cap strategy does not distinguish between overvalued and undervalued companies and “guarantees” underperformance net of fees.

Mike Robinson, head of Tilney for intermediaries, said in a statement that there is a clear demand from advisers for low cost funds, but many advisers know there are drawbacks with market cap, and so is turning to smart beta.

“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,” he said. “The portfolios will represent an evolution in the market from the plethora of traditional passive-only, multi-asset funds.”

Tilney will provide more detail on the launch in early 2016.

Tilney joins a growing trend of DFMs that offer both active and passive fund ranges to advises, like Copia Capital, Parmenion, Whitechurch Securities, 7IM, Assetfirst and EBIP. However, the majority of DFMs remain predominantly active fund houses.