IG Smart Portfolios: two years old and performing well

We launched IG Smart Portfolios two years ago with the goal of bringing affordable investing to our clients. Two years on, find out how our portfolios are performing vs. the competition.

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results
IG Smart Portfolios

IG was founded in 1974, but our share dealing and investment services are still fresh faced. When we launched IG Smart Portfolios two years ago, it was done on the premise that investors deserved a better and more convenient type of long-term investment product than that widely available in the market.

An environment of low prospective returns for bonds means that costs really matter – it makes no sense to pay 1.5% or more in fees when a 10-year UK Government Bond yields just 1.3%. Paying a platform charge to own a fund and various levels of fund manager fees can really eat into your long-term returns.

Our portfolios are designed to reduce investor costs to the bare minimum, charging low fees and partnering with BlackRock for asset allocation knowledge, while using technology to deliver the same robust asset allocation to a client, whether they have £2,000 to invest or £2 million.

How have the portfolios performed?

Investment conditions have been challenging, notably in the last quarter (Q4) of 2018, but overall, we have been pleased with how the portfolios have performed. The chart below compares returns with annualised volatility, illustrating that the portfolios are genuinely offering different risk and return profiles with the more equity exposed portfolios benefitting most from the recent market rally.

Risks vs returns chart

However, it takes a drawdown chart to show this best. the chart below shows the maximum peak to trough loss than an investor in our five risk profiles would have suffered since our portfolios were launched. The Aggressive portfolio may have performed best, but the maximum drawdown in December was much sharper than the Moderate and Balanced profiles.

Investors with less risk tolerance, or a shorter time horizon, should always take a more cautious approach as forced selling at market bottoms is the ultimate investment error.

Portfolio drawdowns chart

Smart Portfolios vs the competition

Over the long run it is our firm belief that a combination of low costs and sensible asset allocations will give your investments the best chance to thrive. To assess this, our portfolios are benchmarked to the Asset Risk Consultants Private Client Indices (ARC), a firm that aggregates real after-fees portfolio returns for the UK wealth management industry - this includes providers such as Coutts, Schroders, St James Place and UBS.

To date Smart Portfolios are ahead by between +1.2% and +2.7% on a net of fees basis.

28 February 2017 to 28 February 2019
Portfolio Benchmark Composite BM +/-
Moderate ARC Sterling Cautious PCI 2.1% 0.9% 1.2%
Balanced ARC Sterling Balanced Asset PCI 4.9% 2.2% 2.7%
Growth ARC Sterling Steady Growth PCI 6.6% 4.8% 1.7%
Aggressive ARC Sterling Equity Risk PCI 8.2% 6.4% 1.7%

Source: IG Group, Asset Risk Consultants (ARC), Includes estimated performance for the ARC Private Client Indices in January and February 2019.

How have they done this? Our analysis shows that lower headline management fees have helped, but also the way our portfolios are managed is different to the traditional space. Many investment managers use actively managed funds and alternative investments, which aim to have uncorrelated returns with conventional investments, however it’s our belief that using low cost exchange traded funds (ETFs) will deliver more consistent returns over time.

In addition, while the risks within our portfolios are constantly analysed and assessed, the asset allocations change infrequently which reduces the temptation to try and time the market. We saw a sharp sell-off in the last quarter of 2018, followed by a rebound at the start of 2019; reducing risk as the markets fell would not have added any value unless timed to perfection.

This is the crux of our offering; globally diversified portfolios, strategically invested for the long term with costs kept to a minimum. We hope to be able to look through the market noise in the months ahead.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.