Model Portfolio Research

Hi Paraplanner Gang,

I was wondering if anyone could help with an issue we are having with Model Portfolio Research?

We are essentially looking for a shortlist of providers who offer both active and passive model portfolios - preferably the same amount of each( 5 each matching our risk ratings). The problem we are faced with is Defaqto does not produce an accurate list of passive funds making the actual shortlist void!

I have contacted Defaqto and they are aware of this issue but cannot offer a resolution - does anyone have any suggestions or alternative due diligence methods for Model Portfolios?

Many thanks in advance guys!



  • Sorry, not sure on how best to answer the general model portfolio research. I've heard of discus but not used it myself.

    The company I work for didn't really find any model portfolio providers fit their needs so built their own. They've just started offering it to other companies. It's really for companies doing financial planning and the investments are just a way to get them to achieve their objectives. It's fits in really well with FinaMetrica if you use that.

    There's 9 different equity allocation portfolios (starting with a 10% growth allocation, below this would be cash) both with a passive and a core-satellite (which uses the active funds to try and get a bit of outperformance depending on the client). There's also 3 income portfolios.

    The website is 

  • We use Morningstar (formerly OBSR) portfolios and the portfolios with the same asset allocation (Ibbotson Associates apparently) made up of Vanguard funds. My impression is they are safe and boring solid bet, the consensus in my previous firm was that they can be a little slow to ditch an under performing fund.

    We access this through Paradigm and we did at my previous firm too so I don't know how it works otherwise. We get quarterly recommendations for the active portfolios. The passive portfolios tend only to change in May following the annual asset allocation review. There are also 50/50 portfolios in each of the 5 risk profiles. These dovetail nicely with the Morningstar risk questionnaire, which we like.

    We also like the Tatton Managed portfolios, which also come in a passive version. These are only available on about 6 platforms though. Contact me re the pitfalls if you go for Tatton.
  • Hey Clare

    If I were operating an adviser firm, I would find one suite of Multi-Asset passive funds and one suite of Multi-Asset active funds and blend them on a 50:50 basis for each of the different risk profiles.

    It is then up to the managers of the different portfolios to change the underlying assets according to market conditions.  It takes that whole side of what advisers do away and lets be honest no-one really knows what is going to happen anyway, so why try and second guess the market yourselves changing funds and asset allocations.

    The other issue with the method you mention is unless you have discretionary permissions, I guess you need to write to the client everytime you get a quarterly notification to change, which can be cumbersome.  If you only make the changes at time of annual review, this means a client could hold a fund that you no longer like for a period of 11 months, which I would suggest is not very TCF.

    To give you an example of the kind of portfolio strategy I have put together for an adviser in the past, blend L&G Multi-Index with SEI and you get two portfolios with active asset allocation, one passive and one active and I should imagine the TER will be no higher than about 0.70%.  Compare this with what you are doing at the moment and see what the results are in terms of return and risk, I think you will be suprised at how the risk return charts stack up, i.e. each level of risk delivers a better return haveing experienced higher volatility.

    Food for thought.


  • I'd do something very similar to Nathan. Then all you really have to do is an annual rebalance at review and regular due diligence on the particular range of funds that you are doing.

    Even if you do change one, the likelihood of the previous one being so bad that you have to get everyone out before review is slim.
    Benjamin Fabi FPFS
    Chartered Financial Planner 
  • Thanks guys, this isn't within my power to do anything about the moment. Maybe some day, I have bookmarked the post, in hope.

    I hope Carli has a few more options for her shortlist, if only to discount, so she can produce the paperwork to demonstrate an exercise. For some of us, realistic is more limited than our ambitions unfortunately. Of course, I do appreciate your time and efforts.

    How is it going Carli?

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