PARTNERED INSIGHT: Much of Prudential Portfolio Management Group (PPMG) multi-asset expertise has been built on the same philosophy and values that serve Prudential's With-Profits Fund - a portfolio that has produced positive results over the long term.
Their approach to managing investments has meant that the group has maintained its annual bonus rates, and also delivered final bonuses for most customers in recent years.
"A With-Profits Fund is set up to provide a bonus rate and you have to manage the capital accordingly to do that. Once you have attached a bonus to an individual's policy, the regulator will ask how much capital you have and take a view as to whether your capital can pay out that promise," says Andy Brown, Investment Director at PPMG. "Management of the underlying fund is therefore with a much more liability-driven mind-set. And that overarching style of investing means we do try and focus on what the outcome should be at all times."
The With-Profits Fund has also helped the group to access a range of ‘newer' assets within its multi-asset ranges which are less correlated with traditional equities and bond assets, but often inaccessible to most asset managers.
For example, PPMG has been investing in diverse asset classes within the alternatives space, as well as African equities and Asian credit within its multi-asset vehicles since 2006.
Brown explains that if investors can identify these types of longer-term trends and buy them before market momentum pushes the price of those assets up, they are able to benefit from a significant upswing.
"We dipped our toe into African markets over a decade ago, and the small test investment has now resulted in a target allocation approaching £1.25 billion and we will probably be one of the largest UK based investors in African equities."
Brown notes that while many investors found such asset classes inaccessible and too volatile to trade in, the wealth of experience of running the Prudential With-Profits fund, and a focus specifically on outcomes provides PPMG with confidence.
"As risk-free assets disappear, investors today have to sit back and really think about where to invest. That is where the expansion into less correlated assets is key. And it is the bigger funds, those with a wide enough structure like Prudential and PPMG's that can access them."
Click here for access to the full interview and Multi-Asset magazine which explores the evolution of investment markets and how multi-asset fund strategies have moved on from single manager ‘cautious' and ‘balanced' vehicles.
