THEGATEKEEPERSSTUDYUnlockingtheSecretsofFundResearch

2017

Gatekeeper/ˈɡeɪtkiːpə/1. anattendantemployedtocontrolwhogoes

throughagate2. Apersonorthingthatcontrols access to

something3. AnorangeandbrownEuropeanbutterfly

Assets• Q117:£997bn• 2010: £567bn• Q107:£444bn• 10-yeargrowth:+125%

Netsales• 2016:£20bn• Lastfiveyears:£62bn• Last10years:£146bn

THEUKFUNDINDUSTRY

Source:Broadridge FinancialSolutions

GATEKEEPERS

Source:Fundscape

IFAs~70-75%

Wholesalechannels

WMs~13%

Life&PensCOs~5%

D2Cp/forms>8%

Primarychannels

Banksetc<1%

Fundmanagers(direct)

Investors<1%

Gatekeepers50-70%

Life&PensionCOs Platforms60%

THESIZEOFTHEPIE

Source:Fundscape

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2010 2011 2012 2013 2014 2015 2016 Q117

FOFs Pref fund deals MPs & CIPs Total platform sales

PlatformAUA(Mar2017):£520bnGrossplatformsalesin2016:£94bnNetplatformsalesin2016:£38bn

THESIZEOFTHEFUTUREPIE

Source:Fundscapeestimates

0

200

400

600

800

1,000

1,200

1,400

1,600

2017 2018 2019 2020 2021

Pessimistic Realistic Optimistic

£1.5trn

£1.2trn

£894bn

PessimisticCAGRto2021:18%RealisticCAGR:22%OptimisticCAGR:24%

7

ADVISERRISKS

• Platformduediligence

• Riskandreturnassessment

• Whoseassetallocationprocess?

• Analysisandmanagerselection

• Monitoringandreporting–benchmarking,charges,VFM

ASSETALLOCATIONRiskprofile5

OMW5 DT5

Cash 45% 0%Bonds 0% 35%Property 0% 7%UKequity 8% 26%Globalequity 47% 32%

HOWACTIVEISACTIVE?

0

20

40

60

80

100

0 5 10 15 20

Activ

e sh

are

3-yr tracking error

Trkrs11%

Diversifiedstock-picking50% Concentrated

stock-picking7%

Factor bets0%Closet trackers32%

Source:Morningstar,Cremers &Petajisto (2009),gbi2

0

10

20

30

40

50

60

7010%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

21%

22%

23%

24%

25%

26%

27%

28%

# fu

nds

Annualised returns

UKEQUITYACTIVE

Redband=FTSEAllShareperformance.SourceFE,gbi2

SELECTIONCRITERIA

• Howtoselectifpastperformanceisnotacriterion?

• Benchmarking

• Nomore‘suitsyousir’comparators

• VFM

‘Costofmanagement’goesonresearchers’checklist

• UnitpriceofactivesharebenchmarksfundAMC

• Qualitativeassessment– selectivityprocess

12

ADVISERRISK

• Assessingsuitability

• Riskassessmentanddiscussion

• Designtheportfoliotomatch

• Assetallocationprocess

• Managerselection

• Monitoringandanalysis

• Reporting

OUTSOURCINGISNOTEASY

WHOARETHEY?

RATINGSAGENCIES

D2CBUY-LISTS

ADVISERBUY-LISTS

DFMs

METHODOLOGY

• Assumptions• TotalIAuniverseplusFCA-authorised funds• Twocohorts:listedandunlisted• Metrics• Alphaandbetavsector• Volatility• OCF• AUM,PTR,Fundlife,managertenure• SalesPerformanceBalanceratioTM

UNIVERSE• InvestmentAssociationuniverse:3,626• FCA-authorised foreignfunds:5,189

• 1,161listedfundsfromIAuniverse• 448listedFCA-authorised funds• 198fundgroups• Listedcohortrepresents18%ofinvestableuniverseand32%ofIAuniverse

COMMONDENOMINATORSACROSSGATEKEEPERS

• Positivealphaintheprevious3yearsandcurrentyear• Trackrecordoffiveyears• Fundmanagertenureof>4years• Assets>£200m• Assetgrowthevenlysplitbetweensalesandperformance(SPBratio)

=FUNDSCAPEFACTORS

TOPFIVEGATEKEEPERSBY10-YEARRETURNS

1. ISALtd– StarManagers2. Bestinvest BestofBreed3. ISALtd– GrowthPortfolio4. BrooksMacdonald5. Axa researchfundrange- Showcase

MOSTCONSISTENTPERFORMERS

Byreturnsoverone,three,fiveand10years

• ISALtd– Growthportfolio

• Bestinvest - BestofBreed

TOPFIVEGATKEEPERSBYFUNDSCAPEFACTORS

1. FundscapeFrontierFunds2. Bestinvest – BestofBreed3. InvestmentAdviser100Club4. HLWealth150+5. AJBellFavourite funds

TOPFUNDGROUPS

1. Schroders2. Fidelity3. Invesco4. M&G5. Jupiter6. Henderson7. OldMutual8. ColThreadneedle9. BlackRock10. StandardLife

1. Fidelity 68 2432. Schroders 61 2333. OM 69 2204. BlackRock 67 2035. Jupiter 34 1866. Invesco 42 1787. M&G 39 1608. ColThread 45 1539. Henderson 41 14810. Artemis 21 129

Q22015 Q12017

Funds #Apps

TOPFUNDS#PICKS

1. StewartAsiaPacLeaders2. BlackRockGold&Gen3. ArtemisIncome4. Axa Fram UKSel Opps5. M&GOptimalIncome6. NewtonGlobalIncome7. JupiterEuropean8. IPCorporateBond9. OMUKAlpha10. FSGlobalListedInfras.

1. StewartAsiaPacLeaders2. WoodfordEquityIncome3. Fundsmith Equity4. JupiterEuropean5. SchroderTokyo6. Liontrust SpecialSits7. ArtemisGlobalIncome8. M&GOptimalIncome9. Threadneedle Uk Eq Inc10. ArtemisIncome

Q22015 Q12017

SELECTIONFACTORSTOGETYOUNOTICED

Fivekeyconclusions

• Blahblah

CONCLUSIONS

HOWWECANHELPFUNDGROUPS

• Provideanongoingreviewoffundselectorsinthemarketandhowwelltheyhaveperformed

• Outlinethecriticalsuccessfactorsforbeingselectedinthischallengingenvironment

• Provideyou withvaluablecompetitorinsight,allowingyou tomonitoryour peersandbenchmarkyour progress

• Equipyouwiththenecessarytoolstohelpchallengefundselectionsandentrenchedpositionsonlists

INTERACTIVEDATA

Searchbyfundgroup

INTERACTIVEDATA

Searchbyfund

INTERACTIVEDATA

Searchbygatekeeper

INTERACTIVEDATASearchbysector

HOWWECANHELP• GatekeepersReportplusfulldataset

• £4000

• Quarterlyanalysis(annualdatapackages)• £2,000

• Bespokeanalysis

DISCOUNTCODE:SUMMERSPECIAL

INTHEFUTURE

• Moregatekeepers• Feedbackfromfundgroups• Feedbackfromintermediaries• Testingservice

THANKYOU