Why we invest through funds

EQ’s model investment portfolios are compiled from funds, not individual equities or bonds. We firmly believe that is the optimal way to invest in the modern era.

1. We invest globally

UK equities typically represent less than half of our portfolios, which leaves an investment universe of more than 45,000 securities. No UK Wealth manager has the resources to research these adequately. So the only sensible option is to invest through specialist fund managers who are experts in their field.

2. The ‘good old days’ have gone

In order to beat the markets you need better information than your competitors. Fifty years ago less than half of all shares were owned by professional investors and many of those had a far from optimal process. Nowadays, highly trained and educated investment analysts assess all available research sources constantly. Computer based trading systems assess company announcements within milliseconds to exploit valuation anomalies.

In these circumstances, we believe that it makes sense for us to identify those specialist fund managers who can demonstrate a competitive edge.

3. Funds are more tax efficient

When a fund manager sells shares at a profit in the portfolio this does not trigger a tax liability for holders.

What about ETFs and Tracker funds?

Actively managed funds rely on exploiting inefficiencies in markets. This is harder to achieve in some areas, especially when investing in the largest quoted companies where there is a multitude of high quality research available. If we are not convinced that the extra costs of active management can be compensated by superior performance, we will invest in a low cost passive fund. We also offer a range of ‘Passives only’ portfolios to suit clients who want to keep costs down to a minimum.

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