Spiral & Fool Asset Management are to launch the first ever fund of fund of funds, with the group hoping to provide a highly diversified portfolio and outsourcing proposition for advisers. 
Fund of funds have become increasingly popular over recent years as they offer a one-stop-shop for less experienced investors and are now often used by advisers who want to outsource their client investment decisions.
However, Spiral & Fool believe it has spotted a gap in the advisory market given its belief that investors need greater diversification within their portfolios. Therefore, the new S&F Moderately Optimistic fund will hold a collection of 30 funds of funds, meaning potential investors will have exposure to 420 underlying portfolios.
“This product will be launched following a rigorous research process and aims to address a gap in the market created by investors who have absolutely no idea what they are doing,” David Spiral, chief executive officer at the group, said.
Keith Fool, who is to manage the fund, points out that S&F Moderately Optimistic’s process is highly differentiated to most other offerings.
“Investors are regularly told that past performance is no guide to the future, but we remain unconvinced,” he said.
“Our process revolves around momentum investing, therefore picking fund of funds that have performed very well in the belief that that will continue. Indeed, by back testing the portfolio, we can see that our innovative quant screen has added genuine value for investors over the longer term.”
While the back tested returns of S&F Moderately Optimistic have been strong – it has more than doubled the sector’s returns over the past 10 years – some still remain unconvinced whether its outperformance is repeatable given the portfolio is solely made up of top decile funds over the past decade.
Performance of fund versus sector and index over 10yrs
Source: FE Analytics
One of the major sticking points with many potential investors, however, is the fund’s expected ongoing charges figure – which stands at 6.9 per cent thanks to the triple layer of fees.
For example, one regular FE Trustnet commenter – who wished to rename nameless – said he “couldn’t put into words how angry” he was at such a proposition and that it “sums up all that is wrong with the fund management industry.”
That being said, many advisers and retail investors have heralded the “ground-breaking” new fund.
“I think it’s a fantastic filtering process to ensure that investors really do hold the cream of the crop in their portfolio: not only is a portfolio of funds selected by a multimanager and an experienced research team, their own fund is then placed into a portfolio of yet more hand-picked fund-of-funds,” Joan Smith of Bunce Wealth Management said.
“It’s likely that investors will quibble over the costs but I simply think it’s a case of ‘you get what you pay for’. Why have exposure to 30-odd funds in one investment vehicle when you can have exposure to 900?”
“They’re wonderful funds for the likes of a ‘Mrs Miggins’, who may only want to hold one investment vehicle, let the experts do all the hard work in managing a diversified portfolio of funds and get a good night’s sleep knowing she won’t have to check her ISA every week.”
Sebastian Baxter-Macalister, managing director of Wild West Capital, says he’s looking to utilise the diversification benefits of Spiral & Fool’s new offering for most of his clients’ retirement portfolios.
“I’ve been a big fan of funds of funds for several years but I struggle to choose between them due to all the funny names, but with this new offering from Spiral & Fool I am hoping I can dampen down some volatility for my clients and get some very wide exposure to literally all of the best managers out there.”
“I’m a little worried about the cost but you get what you pay for is my motto, and should there be another fund of fund of funds launch I would be interested in splitting my clients’ money between the two. That’d create my own sort of fund of fund of fund of funds. I think.”
In terms of the fund’s high fees, Spiral added: “Anyone complaining about the high charges doesn’t understand capitalism. If you don’t like it, go and live in North Korea.”