We all know that interest rates have been at historically low levels for some time and it is likely that they will remain so. Low rates represent a new norm for investors to contend with, with no change in sight. At Progeny Asset Management, it’s our aim as investment managers to help investors get the desired return from their portfolios whichever way the wind blows in the market, and whatever the interest rate levels.
We’re pleased to announce a new portfolio product created specifically for this climate. The Progeny Asset Management Optimised Passive Income 60/40 is a low-cost, index-tracking solution developed for an investing environment where it can be difficult for investors to achieve their desired yield.
The Benefits of Exchange-Traded Funds (ETFs)
Designed for investors seeking exposure to a range of global asset classes, Progeny’s Optimised Passive Income 60/40 has a target yield of 3% per year. The portfolio is made up exclusively of exchange-traded funds (ETFs). ETFs have exponentially increased in popularity in recent years due to their lower fees and the flexibility and tax efficiency they offer investors. They are employed in this portfolio because they share some important attributes: they provide a large investment universe; they are open-ended and liquid; and they can be traded on exchange. They also provide excellent opportunities for diversification and exposure to a wide variety of asset classes.
The portfolio can allocate around 60% globally to equities, listed private equity and property, and around 40% to global fixed income. There are a number of primary and secondary factors driving our ETF selection, as follows:
- Dividend yield
- Whole of market approach
- Market capitalisation
- AUM, which drives lower expense ratios
Building Blocks and Insight
Our Optimised Passive Income 60/40 is a product of Progeny Asset Management’s expertise along with the support and assistance of two leading industry players. The solution is based on a diversified range of ETFs that give efficient exposure to assets across the globe.
BlackRock, as the largest provider of exchange-traded-funds (ETFs) in the world1, was able to bring its significant experience and insight to bear on the optimisation of the portfolio. Given the scale of BlackRock within this sector, the solution comprises iShares, BlackRock’s ETF brand name.
Winterflood Business Services, a division of Winterflood Securities Limited, provides the custody and dealing services.
Taking a Scientific Approach
Optimised Passive Income 60/40 – which will be available via Financial Advisers only, not direct to clients – takes its inspiration from Modern Portfolio Theory, the brainchild of Nobel Prize-winning economist Harry Markowitz. Modern Portfolio Theory shows how investors can construct portfolios to optimise or maximise expected returns based on a given level of market risk, understanding that risk is an inherent part of higher reward.
Markowitz found that it’s possible to design an optimal portfolio offering the maximum possible expected return for a given level of risk, or the lowest risk for a given level of expected return, emphasising the importance of diversification in achieving this. More detail on Modern Portfolio Theory can be found in our brochure.
As part of our client-led ethos, we know investors and their advisers need diversified upside exposure and yield, but also wish to understand the downside risks. Optimised Passive Income 60/40 provides this in a modern cost-effective and transparent structure. With an all-in fee of below 1%, it offers a straightforward growth and yield solution that investors can tuck away for the long term. They can be reassured that if they should need their money it can be raised quickly, as the ETFs are liquid and traded on exchange. It is designed to meet the demands of investors who are seeking an income from their assets in a climate of lower interest rates and it can also complement more complex, bespoke portfolio structuring.
If you are an investor and you would like more information, please speak to your adviser for more detail on the product. If you are an adviser, please view the product brochure here and contact us directly for more information. We’d love to talk to you.
News of the launch of our Optimised Passive Income 60/40 portfolio has been published in:
- Citywire Wealth Manager: “Wealth boutique to launch multi-asset ETF portfolio“
- FT Adviser: “Multi-asset ETF aiming for 3% yield launches“
- Professional Adviser: “Progeny AM launches multi-asset ETF“
- Private Banker International: “Progeny Asset Management unveils multi asset ETF product“
- TheWealthNet.com: “Wealth planning, investment management and legal hybrid group launches multi asset ETF” [subscription required]
- International Adviser: “Progeny launches adviser-only ETF“
- Portfolio Adviser: “Progeny launches multi-asset ETF portfolio“
- Funds Europe: “Progeny unveils multi-asset ETF“
- WealthBriefing: “What’s New In Investments, Funds? – Progeny AM” [subscription required]
- etfexpress: “Progeny launches multi-asset ETF income product“
- wealthadviser: “Progeny aims for low cost ETF income solution“
1 iShares is the world’s leading Exchange Traded Fund (ETF) provider with more than a decade of expertise and commitment to investors. This is based on over 820 ETFs and more than $1.2 trillion USD in assets under management globally (BlackRock, 30/09/17).
This article does not constitute Investment advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your Investment Manager to take into account your particular investment objectives, financial situation and individual needs. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested, therefore your capital is always at risk.