RBC Brewin Dolphin’s head of central investment solutions David Hood has revealed to FT Adviser how the company picks the fund managers that run its £6.5bn model portfolio range.
Advisers who allocate client capital to the RBC Brewin Dolphin range are placed into a combination of six funds which come under the firm's brand but are run by external fund managers.
Hood said what the firm wants to see with a manager it allocates capital to is "a repeatable and robust process".
"We want to be able to understand how they run their fund and understand they can keep doing that," he said.
"A real red flag for us would be if they make an investment decision that looks unusual, relative to how they normally invest.
"The other thing we want to see, to be frank, is a certain level of humbleness from the fund manager. We prefer a team-based approach and certainly do not go out looking for individual star managers. Hubris is not something we want to see.
"We will always ask about succession planning, that is, what is in place if a manager leaves.”
Almost all of the £6.5bn invested by RBC Brewin Dolphin is run by the external fund managers as a segregated mandate.
This is a specific and separate fund which mirrors a fund managers main fund, but where Brewin Dolphin is the only client.
Hood said this benefits clients because if Brewin Dolphin wishes to replace a fund manager, it does not have to sell the client’s holding in a fund, but instead can simply replace the fund house managing the client’s money.
This potentially saves the client stamp duty costs and means the client would not be stuck in cash while one fund is sold and replaced with another.
RBC Brewin Dolphin launched the manager of managers fund range in 2018 in the belief it would help drive down the cost of its model portfolio service in what Hood called a competitive market.
He told FT Adviser that when the range launched, the OCF for advised clients was 0.6 per cent but it is now closer to 0.4 per cent.
He said: "As the fund range has grown, we have been able to negotiate lower charges from the managers we invest with, and pass those savings on to our clients.”
Of the six funds in RBC Brewin Dolphin’s range, the largest is the bond fund, which is £2.5bn in size.
Hood said short-term underperformance is not necessarily a reason to drop a fund, with the Brewin Dolphin model portfolios having investments in both Lindsell Train and Fundsmith - both of which have performed poorly in recent years.
Hood said: “When you see underperformance you have to put it in the context of market conditions, both of those funds would be expected to underperform in these conditions, what is more worrying for us is if a fund doesn’t perform when we expect it to.”
