PORTFOLIO CHANGES
Consolidating the Core Range of Model Portfolios: A Streamlined Future
From February 2025, HFMC Asset Management will consolidate the Core range of model portfolios, removing the distinction between those “including property” and “excluding property.” This decision marks an important milestone in simplifying and enhancing client portfolios, to ensure they remain appropriate as well as align with industry best practices. By streamlining the Core range to mirror the structure of our Passive and Positive Impact portfolios, this small change aims to better serve client long-term interests.
Characterising: The Evolution of Property as an Asset Class
At the time of the launch of the HFMC Asset Management Quadrant discretionary business in 2010, a significant number of clients held specialist property funds, to the extent that there were good reasons to offer a distinction between an ‘including property’ and ‘excluding property’ portfolios. This is no longer the case.
Historically, the Core portfolios invested in UK-listed, regulated, daily dealt property funds, focusing primarily on physical bricks-and-mortar property funds. These funds were valued for their relative stability but were not without challenges. Buying and selling physical buildings takes time, making these funds vulnerable during periods of heightened investor withdrawals. This was starkly demonstrated during two major events: the EU Referendum in 2016 and the property market uncertainty of 2019. In both cases, bricks-and-mortar funds were forced to suspend dealing, locking investors out of their capital for many months.
In response, we no longer felt bricks and mortar property funds were acceptable for client portfolios, choosing instead to only invest small amounts in real estate investment trusts (REITs). Unlike bricks-and-mortar funds, which directly invest in physical properties, REITs invest in the shares of property rental businesses, which whilst offering greater liquidity and adaptability, also display more volatility. This has led to a significant reduction in property allocations within the “including property” models—from a peak of 14% to the current level of 2-3%—as we now prioritise broader diversification, such as global infrastructure funds.
Consolidating: Why Now?
The primary driver of this consolidation is the realisation the distinction between “including property” and “excluding property” no longer adds meaningful client value or differences to client investment outcomes. In fact, the difference in performance outcomes has diminished significantly, as the asset allocation mix of the two types of portfolios have merged closer and closer together.
Streamlining the Core range into a unified proposition therefore offers consistency, transparency, and simplicity.
Carrying out the Plan: What It Means For You
Our plan is to consolidate the Core range during the February 2025 portfolio rebalance, in order to ensure minimal disruption to your investments. If you currently hold a portfolio within the Core range, we will manage this all for you, so there is no action you need to take.
While there may be slight timing variations depending on the platform your portfolio is held on, we are committed to making this transition as smooth as possible. Importantly, we will not charge any additional fees to implement this change.
You may notice a brief period where your funds are out of the market while they are sold and reinvested, but this will occur within the regular rebalance schedule to minimise the impact.
Communicating Clearly: Keeping You Informed
We understand the importance of clear communication during this transition. You will receive an initial notice in December 2024 explaining the changes and the reasons behind them, followed by a reminder in January 2025.
From February, all new clients will be invested in the single model for their selected risk profile. We currently envisage this will include a modest amount of property exposure.
Committing to the Future
The consolidation of our Core range reflects the changing nature of how we select property investments as we seek to build long-term, risk appropriate investment solutions for you, our clients.
At the same time, we will align portfolios to the reality of a changed market place for property investing in 2024 and beyond, as well as with needs of our clients.
These changes seek to reinforce our dedication to serving our clients’ best interests with clarity, confidence, and care.
Ready to start planning for your financial goals?
Schedule a free initial consultation
With our professional financial planning services, you can be sure that your finances are in good hands. Let us help you make the right decisions for your future today. Contact us to schedule a free initial consultation and start planning for your financial goals.
OUR THINKING
Summary
Whilst we remain in an interest rate cutting cycle, the journey may be shorter than previously anticipated. This is particularly the case in the United
Whoa, we’re halfway there
Once upon a time, not so long agoTommy used to work on the docks, union’s been on strikeHe’s down on his luck, it’s tough, so
Well, that wasn’t so bad, was it?
With some trepidation I started the Investment Strategy at the beginning of last year, raising the hope that 2024 would deliver a more settled year
