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7IM takes the ultra low-cost multi-asset route


“No one can control the market, but it is possible to influence the fees,” says Verona Kenny (pictured), Managing Director of Intermediary, Seven Investment Management (7IM).

As a consequence of lower expected returns and growing pricing pressure across all elements of the value chain, 7IM has recently launched a range of five ultra-low cost, multi-asset passive model portfolios. Called the 7IM Pathway range, this selection of model portfolios aims to offer advisers a simple way to create a well-diversified portfolio of passives for their clients for just 0.15 per cent (plus underlying investments) per year.

This is not the first set of model portfolios launched by 7IM. The firm introduced a passive model around three years’ ago. Both models use a similar strategic asset allocation. In Kenny’s opinion, it is the backbone of the model with a 15-year track record in controlling the downside while delivering strong returns with real diversification benefits.
“The main difference to the 7IM Pathway and our previous range is that we have removed the allocation to alternatives and replaced it with an allocation to equities instead,” says Kenny who cites cost and complexity as the main reasons for doing this. “To get the relevant exposure to alternatives, some of the instruments can be quite complex and costly.” she says.
In relation to their peers, there are two main differentiators to the 7IM Pathway range, explains Kenny. “We are different in the way we conduct our risk analysis. At 7IM, we believe that risk has to be managed not avoided.”
As a result, 7IM has structured the process into two teams: “The investment management team’s job is to find investment opportunities focusing on return. They of course take risk into account but first return then risk,” says Kenny, “and for the risk team, their focus is on risk first, then return.”
“We want to make sure that for every investment decision, we add the right risk overall and we do not trade unexpected or unrewarded risk elsewhere in the portfolio.”
But it is the lower costs that are proving to be the greatest differentiator, and which are attracting considerable interest, says Kenny. “7IM has had a strong push towards not only our costs but those of our fund managers. Our charges for these models are only 12.5 basis points +VAT. This puts us at one of the lowest cost in the market.
“Where we can, we are using an institutional share class or getting the lowest cost possible for the instruments that we use inside the models. The underlying costs for the models start at seven and go up to a maximum of 14 basis points.”
While it is still in the early stages, Kenny reports that many financial advisers like the price and can “see that we are trying to give good value for money while still having our robust risk management process on top.
“If we are set to move into a period of uncertainty, then we have to look at what it means for the client and find ways of protecting clients from lower returns,” adds Kenny.

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