McQuaker (pictured), who was recently appointed an FE Alpha Manager, says the industry has reacted well to the Retail Distribution Review (RDR), but believes there is still a fair way to go. "Is cost an important factor in buying funds? Absolutely," he said.
"We’ve recently launched the Core Solutions income range at Henderson for this very reason. It uses trackers for certain areas of the market, which gives it a cost advantage, and it’s multi-asset in nature with an income characteristic on top."
"These are the kinds of products we’re seeing demand for. The institutional sector has been cost conscious for some time and now we’re seeing retail heading in the right direction."
"It’s the same spot institutional was in when questions were asked about cost, which bodes well."
McQuaker and his multi-asset team run eight retail funds of funds at Henderson, with combined assets under management (AUM) of around £2bn.
The most recent additions are the Henderson Core 3 Income and Henderson Core 5 Income funds, which were launched in September 2012.
They both target a high level of income as well as capital growth, although the Core 5 Income portfolio is a little more growth focused and tends to be more volatile.
They invest across a range of asset classes including equities, bonds, property and other alternative assets such as infrastructure.
"We hold both active and passive funds in the portfolios," he explained. "The idea is that we only buy an active fund when we think that particular manager can add value in the area and justify the fees."
"There are certain investors who want the maximum exposure to the best managers across the board, but others are more cost-conscious. It’s those we’re targeting with these products."
For anyone investing directly, the estimated total expense ratio (TER) of the Core 3 Income and Core 5 Income funds is 0.85 per cent. They both require a minimum investment of £1,000.
FE Analytics shows the funds have made a decent start, up 6.58 and 10.48 per cent since launch, respectively.
Performance of funds since launch
Source: FE Analytics
McQuaker says he has recently added Gervais Williams’ Miton Multi Cap Income fund to a number of his portfolios – but not the Core Income funds.
"This provides a nice insight into the different strategies I run," he said. "In the one that is more cost-conscious, we feel the passive exposure is more appropriate, as the budget is less generous."
"We like Gervais as a manager very much. He’s been running small caps for a long time, and we like that this fund does something different to the average equity income fund," McQuaker added.
The manager thinks a fund of funds is a good option for an investor who does not have the time or knowledge to switch around their holdings regularly – particularly one with an income focus.
"You get active allocation in a single fund," he explained. "You have to be incredibly dedicated to actively manage a portfolio of funds."
"In these funds, you get the income on top of the capital growth, so it’s really an all-in-one kind of portfolio."
This article was written in collaboration with and is sponsored by Henderson Global Investors.