London-based Progeny Asset Management has launched a globally diversified multi-asset portfolio solution, built exclusively using iShares ETFs, which targets a combination of income and upside potential.
Ian Hooper, director of Progeny Asset Management.
The Optimised Passive Income 60/40 portfolio allocates approximately 60% of its total exposure to equities, private equity, and property, and around 40% to global fixed income.
No ETF in the portfolio may account for greater than 20% of the total weight, and rebalancing occurs on a quarterly basis.
The portfolio’s strategy takes its inspiration from Modern Portfolio Theory, the brainchild of Nobel Prize-winning economist Harry Markowitz. Modern Portfolio Theory shows how investors can construct portfolios to optimise or maximise expected returns based on a given level of market risk, understanding that risk is an inherent part of higher reward.
The portfolio has a target yield greater than 3% per annum and, using back-testing, has provided a total return in excess of 8.5% per annum over the past three years. Prospective investors should remember the limitations of back-testing and that there is no guarantee the portfolio will reproduce its performance into the future.
The modelled annual draw-down of the portfolio in any 12-month period is not expected to exceed 7%.
Ian Hooper, director of Progeny Asset Management, said, “The whole Progeny ethos is customer-led and this is an example of that. We know investors and their advisers need diversified upside exposure and yield, but also wish to understand the downside risks. They expect this in a modern cost-effective and transparent structure.
“We worked closely with key industry players to design this solution based on a diversified range of ETFs that give efficient exposure to assets across the globe.”
An increasing number of asset managers are using ETFs as the main building blocks to construct portfolios. UK-based providers which have significantly adopted this practice include Copia Capital Management, Armstrong Investment Managers, Seven Investment Management, and iFunds Asset Management, to name a random few.
ETFs are becoming the vehicle of choice due to the flexibility and efficiencies they offer investors. They are open-ended, highly liquid, and provide one-ticket access to diversified investment profiles. Perhaps most importantly, ETFs are low-cost funds which allow asset managers to pass on lower prices to investors.
Progeny charges 0.50% plus VAT for its management services, while the weighted average cost of the underlying funds is not expected to exceed 0.40%.
Hooper said, “With an all-in fee below 1%, the Optimised Passive Income 60/40 portfolio offers a straightforward growth and yield solution that investors can tuck away for the long term, knowing that if they should need their money it can be raised quickly, as the ETFs are liquid and traded on exchange.”