Evidence-based investment firm Sparrows Capital, has launched its platform-based model portfolio service for financial advisers and their networks.
The discretionary service is priced at 0.1 per cent per annum, with a cap of GBP20 per underlying client per month, following extensive research with the lang cat.
The new range, marketed under the name SCore MPS, comprises 11 factor tilted portfolios representing equity exposures from zero to 100 per cent in increments of 10 per cent. It is available in funds-only format, or as a combination of Index Funds and ETFs to suit the preferences of financial advisers and their clients.
Commenting on the launch, Sparrows Capital CEO, Yariv Haim, says: “Charging asset-based fees for model portfolios is not only outdated, it is unfair on clients and unjustifiable. The launch of this price disruptive product addresses regulatory concerns over the provision of value to end investors, while responding to issues of accessibility, transparency and cost identified by the introduction of MiFID II.
“There is no valid reason why a client investing GBP100,000 in a model portfolio should pay 10 times as much as another client with GBP10,000 in the same portfolio. Clear and predictable pricing will enable IFAs to deliver better outcomes to their clients.”
The GBP20 charge covers portfolio construction, index selection, Index Fund/ETF screening, portfolio monitoring, risk management and rebalancing.
Sparrows Capital writes that at a time when value is being questioned across the industry, the team believes that their innovative charging structure will appeal to advisers and investors of all types, challenging the status quo in an industry that has a reputation for overcharging and underperforming.
Sparrows Capital’s central objective is to deliver enhanced market returns to its clients as efficiently as possible. The firm’s core portfolio dates from July 2008 and has been managed in a consistent evidence-based manner since its inception.
The firm’s approach is based on long term market data backed by robust academic studies that identify asset allocation as the primary driver of risk and return over the medium to long term, Sparrows Capital write. The team does not pick stocks or time the markets, but instead uses Index Funds and ETFs to build portfolios to track the selected markets and harvest the associated return.
This approach reflects the style adopted by the Norwegian sovereign wealth fund Government Pension Fund Global (GPFG), and the Japanese Government Pension Investment Fund (GPIF), two of the largest endowments worldwide.
Professor Elroy Dimson, former chairman of the GPFG’s Strategy Council, who has been consultant to Sparrows Capital’s Board of Directors since 2014, has supported the development of this product. Professor Dimson is currently chairman of the Centre for Endowment Asset Management at Cambridge Judge Business School, and also chairs the FTSE Policy Group.