The launch of the New Ireland iFunds range was eagerly anticipated in February 2014, with Standard Life, Irish Life and Zurich Life having already rolled out their range of ‘risk rated’ funds. The iFunds series of funds are targeted at investors who want to take on some level of investment risk, from those looking to beat bank deposit rates to those seeking higher long term growth.
There are four funds in the range – iFunds 3, iFunds 4, iFunds 5 and iFunds Equities. As the numbers increase, so too does the risk profile and equity content of the fund, with iFunds Equities being 97% invested in equities. We like how the range gives our clients exposure to world class investment managers and a range of asset classes through one single fund. iFunds provides access to a diversified portfolio of funds with the simplicity of investing in just one fund – making it much easier to keep track of your investment.
The iFunds range are a ‘fund of funds’ investment strategy, similar to how the Davy Select GPS range works. This means that the investment strategies are a sum of individual funds, not all of which are available separately on the New Ireland platform. A simple premise you may say…. Enter Wilshire Associates, who are independent advisers responsible for overseeing asset allocation, fund weightings, making recommendations as to which funds to include or perhaps to leave out of an iFunds strategy.
New Ireland and Wilshire Associates can choose from an ‘a la carte’ suite of fund managers. For example, on the advice of Wilshire, fund manager Lazard was brought on board due to their expertise in the area of emerging markets. Formally, Wilshire review the iFunds range on a quarterly basis, but they have been quick to react to market developments when required. As New Ireland Assurance are not fund managers, they import the expertise of some of the world’s biggest, best and boutique asset managers e.g State Street Global Advisors, BNY Mellon, Schroders and Lazard.
If you are a regular reader of our blogs, you will know that at Metis Ireland we stress the importance of having diversified investment portfolios in place as a method of managing risk. I like the three-pillared approach that the iFunds range take to diversification; they are multi-asset, multi-manager and multi-strategy. The multi-strategy piece is interesting if we look at the BNY Mellon Global Real Return Fund and the Insight Broad Opportunities Fund, which feature in iFunds 3, iFunds 4 and iFunds 5. Both aim to produce a return of 4% per annum above Cash, but employ very different strategies to achieve this. This is reassuring, as no fund manager will ‘get it right’ all the time.
Since the iFunds range became available, over €700m has been invested in the strategy and are now on track to reach €1bn in assets under management by the end of 2015. It is interesting to note that 50% of these funds are invested in iFunds 3 – the ‘lowest risk’ option of the range. We believe this is as a result of bank deposit rates approaching zero or even negative territory. Investors have seen funds recover since Financial Crisis and are willing to take on some level of risk with the aim of growing their investment.
The graph below shows the performance of the funds since inception. Investors in the ‘higher risk’ strategies of iFunds 5 and iFunds Equities have been rewarded in rising markets but have suffered greater declines in falling markets.
Of the four funds, which investment journey would you have been most comfortable with?
The graph also demonstrates that markets have been volatile and that investors in any of the iFunds strategies will see their fund value fluctuate. We have a bearish view for the end of 2015 and into 2016 and will continue to stress the importance of diversification to our clients.
The iFunds range will shortly be made available to Group Pension clients. Our Group Pensions team will be busy arranging presentations to our schemes, as iFunds will be of interest to pension scheme members, particularly those with less than 15 years to retirement or who have larger pension funds built up.
The range does carry an additional annual management charge of 0.2% to 0.3% of fund value per annum. The old maxim ‘you get what you pay for’ springs to mind here. Given the world class investment managers on the iFunds platform and with Wilshire Associates overseeing matters, it makes for a compelling proposition in the world of risk rated funds.
Yvonne O’Brien CFP®
Certified Financial Planner
Metis Ireland Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland. All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified independent financial adviser before entering any financial contract. Metis Ireland Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.