Bestinvest MAP investment management

brodev

Bestinvest has recently introduced MAP investment management service. Does anybody have any opinion on this?

brodev

Has anybody heard of this?

cheerfulcat

It seems to be a series of funds-of-funds. I'm not keen on these personally - you have an additional layer of charges, for a start.

Man_in_Black_4

Firstly, let me declare an interest – I work in the Funds industry.
The term ‘Investment management service’ in this context is really a misnomer. This is a ‘Fund of Funds’ offering. With a proper management service, you talk to your manager about your personal and financial circumstances, and review this with them now and again, and they then ensure that your investments are pointing the right way, invested to your objectives etc.
‘Funds of Funds’ on the otherhand are geared towards the fund’s set objective, which might not be yours – or could well not be yours 12 months down the line – in terms of risk tolerance, investment timescales and so forth.
There are really 2 types of these. The first are run by large investment houses e.g. genuine global experts like Fidelity. The 2nd follows a recent trend where firms that claim to offer ‘financial advice’ offer their own ‘funds of funds’, with or without some external input from an Investment House. This is like what we used to call ‘Broker Funds’.
Arguably, this is done purely for margin. With one of these, the financial advisers can earn higher levels of trail commission (or share of fund management fees) than otherwise.
This then results in their main drawback. There’s an extra layer of charges in addition to the charges on those funds that your ‘fund of fund’ then invests in. For most of these, this means 2%+ p.a. (Best say theirs is currently 2.24%). The cost can sky-rocket if you want to pay for an IFA to help you ensure that your FoF actually matches your personal and financial circumstances and will have investment objectives aligned to your needs/objectives in the way a real investment management service does.
Of course, for those funds geared towards higher-risk/niche investments, this ‘fund of funds’ structure can help by being both ‘multi-asset’ (invests in different things) and multi-manager (the underlying funds are managed by different people). In the longer-term, the benefit of this high-risk exposure may be higher returns outweighing the increased costs. But if you’re a ‘normal’ investor, a ‘fund of funds’ matching your risk profile is likely to give you a return, net of charges, of no more than a good deposit account. If you look at the ‘industry standard projection rates’ – Bestinvests will net off at a rate of return of little more than 4.5%.
The FSA has expressed some concern about what it terms ‘distributor influenced funds’ given the potential conflicts of interest e.g. firm claims to be ‘independent’ but sells you it’s own ‘Fund of Funds’ instead of a better one from a proper firm. See http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2008/0229_dw.shtml
Specifically on the subject of Bestinvest offering the service, they run this fund themselves, and its the first time they’ve done this. Compared with larger investment Houses or ratings agencies, their research capabilities are quite small. If you’re interested in this sort of thing, there’s plenty of choice out there with bigger Investment Houses with more resource, track record for running Funds of Funds etc.
Hope this helps.

Man in Black

brodev

Thanks for your input MIB. I could not have expressed myself properly but you seem to have put my suspicions into words.

dunstonh

FoF are a lazy option and you pay for that laziness. If an IFA uses it then it suggests they are lazy as well. However, that is a generalisation because there are times they can prove useful. Typically with smaller amounts where diversification isnt really possible.

A lot of people reading here have also used the Hargreaves Lansdown MM funds which is a waste of time as well. It sort of defeats the idea of paying less to do it yourself if you then go and use a FoF.