Morningstar Launches Real Return Discretionary Managed Portfolios for UK Market

London - 6 January 2015

Morningstar Investment Management Europe Ltd, part of the Morningstar Investment Management group, today launches Multi-Asset Real Return portfolios as part of the Morningstar OBSR Managed PortfoliosTM service. The new range comprises four discretionary managed portfolios each targeting a specific return in excess of inflation.

The Morningstar OBSR Multi-Asset Real Return portfolios are designed to support advisers in the financial planning process by providing realistic and explicit return targets that can be aligned to the specific investment objectives of their clients. These real return portfolio targets, together with their equity exposure limits, are shown in the following table:

Portfolio name

Real return target

Min / Max equity weight

Real Return 100

CPI +1%

0-40%

Real Return 300

CPI +3%

20-70%

Real Return 500

CPI +5%

60-100%

Real Return  Flexible

CPI +4%

0-100%

Edward Fane, Senior Portfolio Manager for Morningstar Investment Management Europe, comments: “A real return focus requires an investment approach that is different to strategic investing. Our real return investment process is designed to exploit the behavioural bias of investors toward excessive pessimism that can push prices well below long-term fair value ranges and create opportunities for disciplined value investors to achieve superior risk adjusted returns. To find these opportunities, each month we scrutinise more than 150 asset and sub-asset classes to identify those that are under- or over-priced. We then subject the most attractive opportunities to further in-depth fundamental analysis and peer review before we consider their inclusion in the Morningstar OBSR Real Return portfolios. The explicit return and capital loss expectations generated by the Dynamic Asset Allocation approach are ideally suited to this objective.”

The Morningstar OBSR Managed Portfolios are actively managed within a team of 19 investment professionals and supported by the global Morningstar Investment Management group. Morningstar constructs the portfolios using both active and passive instruments. The selection of actively managed funds leverages the Morningstar OBSR Analyst Rated Universe, thereby drawing on the in-depth expertise of Morningstar’s 100 plus manager research analysts located across Europe, Asia, Australia, and North America.

Dan Kemp, co-head of investment consulting and portfolio management, EMEA, for the Morningstar Investment Management group comments: “We believe we will increasingly see investment strategies judged by their ability to meet a specific investment objective or their ability to beat inflation. Morningstar has been successfully managing real return-focused portfolios in Australia since 2009 and we are delighted to be able to offer this strategy to UK investors.”

The Morningstar OBSR Managed Portfolios service launched in May 2013 with a range of active and passive strategies. In October 2014, Morningstar added two Income Portfolios to the service. All of the Morningstar OBSR Managed Portfolios are available across a range of adviser platforms and are aligned to the output of the Morningstar Risk Tolerance Questionnaire.

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