A Managed Portfolio Service (MPS) fund is something that has become very popular with investment firms, financial advisers and clients over the last few years. So what are MPS funds?
All fund managers have a portfolio definition or a mandate to manage a particular fund in a particular way. The fund manager is not allowed to deviate from the mandated terms of the funds objectives. For example a Japanese Small Companies Fund will be investing in UK FTSE 100 companies and a Emerging Markets Fund will not usually be invested in developed markets such as the USA, UK, Europe and Japan.
The same can be said for a Managed Portfolio Service fund. It is a fund that has been mandated by the investment firm to allow the fund manager the discretion to invest in areas within the fund’s remit to try and achieve growth. The fund manager is allowed to make asset allocation decisions as well as individual company share purchase decisions within its remit and with the help or a team of analysts and researchers behind them. They are glorified discretionary funds.
The fund manager will have the discretion to invest across a wide range of continents, sectors, asset classes, shares and bonds (with their mandate) to try and achieve their mandated fund targets for growth. They are truly trying the manage and balance the fund for you.
This is unlike say the Japanese Smaller Companies Fund manager that must invest in Japanese smaller companies only to try and achieve growth.
Financial Advisers Use MPS as a ‘Cop Out’
Charges on MPS
You can expect to pay a little more with an MPS fund of between 0.1% - 0.3% pa on top of the normal annual fund management charge of say between 0.6% - 1.0% pa. This may not seem a lot but 0.2% of a £400,000 pension pot is some £800, when we currently charge £551 for a 1 X policy Money MOT Gold service review.
Just one Fund Manager?
We are not saying one service is better than the other, but you are solely reliant on the fund manager of that MPS rather than having a range of funds and fund managers (with an advised portfolio). To combat this risk, some pension and nvestment firms might offer the following range of MPS funds so that you can access a range of MPS risk profiles and managers:
There are also ‘multi-manager’ funds available where you can select funds from a range of different investment houses and MPS managers.
Managed Portfolio Services have a place for those that prefer to ‘park the bus’ and leave it to a fund manager long term but do not then pay a financial adviser an ongoing % pa simply to leave you invested in the same MPS fund.