The Old Mutual Foundation Funds consist of a range of three directly invested, actively managed, multi-asset portfolios, each of which has the objective of generating a total return in excess of UK inflation (as measured by the consumer prices index (CPI)) over the medium to long term. The investment targets of the three funds, Old Mutual Foundation 3, 4 and 5, are CPI+3%, CPI+4% and CPI+5% over rolling 5-, 7- and 10-year periods respectively.
Accessing the best of Old Mutual Global Investors
The funds will combine security selection by some of Old Mutual Global Investors (OMGI’s) best-known fund managers – including Ashton Bradbury, Richard Buxton, Stewart Cowley, Errol Francis, Ian Heslop, Christine Johnson, Kevin Lilley and Ed Meier – with both strategic and tactical asset allocation by the multi-asset team co-led by Anthony Gillham and Ben Mountain.
Conventional multi-asset investment wisdom typically involves setting allocations to specific asset classes – for example, equities, bonds, alternatives and cash – and then ‘populating’ these allocations with best-in-class examples in each asset class.
The Foundation Funds range is distinctive because it breaks the link between a multi-asset fund’s allocation to individual equity, fixed income, alternative and cash investment strategies and the overall asset allocation (the overall exposure the fund has to the fixed income, equity, alternative and cash asset classes).
And as you are accessing this range of assets through OMGI, we’re able to offer the funds at very competitive cost.
Lowering the cost
Typically, the cost of providing a ‘best-of-breed’ multi-manager, multi-asset solution involves two layers of fees – which makes it hard to achieve a competitive price. There are two ways to get around this:
- Dilute the portfolio with exposure to ‘cheap’ passive investment strategies, all the while accepting that by doing so you are reducing the potential for outperformance.
- Take a directly-invested approach that takes best advantage of the investment skills and prowess of a single asset management firm, thereby enabling that firm to manage the assets within a single-layered fee structure.
This second approach is only viable in a firm like OMGI, which offers sufficient quality of potential sources of outperformance. This is the approach taken by Foundation Funds.