What is a managed investment portfolio and how does it work?

What is a managed investment portfolio?

A managed investment portfolio is an account that’s supervised by an expert portfolio manager who will administrate and monitor your assets’ performance on your behalf. Through this fully managed portfolio, our team will invest for you based on your financial needs and risk appetite to help you reach your investment goals within your proposed timeframe.

Managed accounts diversify your portfolio by increasing your exposure to global capital markets – either via equity or fixed income investments. They can also provide diversification of your allocated assets through alternative investments, which include private equity, venture capital, hedge funds, collectibles, real estate, and commodities.

Managed investment portfolios are known by a few names in the financial services sector such as investment portfolios or a managed account, while ours are called Smart Portfolios.

How does a managed investment portfolio work?

Managed investment portfolios work through accounts administered by portfolio managers who are mandated with investing on your behalf usually using exchange traded funds (ETFs).

ETFs track the performance of a basket of underlying company shares, indices, bonds, commodities, and mutual funds listed on financial market exchanges. The assets tracked by the ETFs can also be categorised in industries and sectors.

Your appetite for risk and investment preferences will determine the investment category portfolio managers will use to diversify your portfolio. For instance, investors who have are risk seeking will choose to absorb the potential downside of getting exposure to an extremely volatile market in hopes of getting higher returns.

Our Smart Portfolios are constructed using asset allocation insight from BlackRock – the world’s leading asset management firm. We’ll use these insights to tailor make your portfolio’s asset allocation using iShares ETFs. When investing with us, you’ll have access to our Smart Portfolio investment calculator, – available in-platform – which will compute your potential returns based on your risk appetite and investment amount.

Allocation of assets

In a diversified portfolio, your risk will be spread across the allocated assets, sectors and geographical areas, potentially minimising the impact of negative market conditions. For instance, if there are assets that make a loss when the economy underperforms, some assets may retain their value or outperform others, mitigating against losses.

We’ve partnered with BlackRock to create a bespoke range of low-cost, institutional-quality portfolios that are tailored for you.

They’re automatically rebalanced for you by our experts to adapt to changing market conditions, and continually target an appropriate level of risk according to the selected strategy.

Diversifying your portfolio

Your portfolio can be diversified by investing across a range of asset classes, sectors, and geographies, which limits your exposure to risk. Diversification will enable you to create a more balanced risk profile, potentially maximising your return on investment over the longer term. It can also include ensuring you’ve got a managed investment portfolio with the right mix of volatile and non-volatile assets.

Rebalancing your portfolio

Your portfolio will go through rebalancing at regular intervals – eg quarterly – to ensure the asset allocation aligns to your risk profile. This will enable your portfolio performance to remain aligned with your investment goals. It’ll restore the initial combination of asset allocated in your portfolio, repositioning your investments, while taking advantage of the latest market opportunities.

Rebalancing automatically adjusts the weightings of assets held within the Smart Portfolios by buying or selling positions. Rebalancing occurs periodically or in reaction to market conditions. It ensures our portfolios sustain asset allocations that continue to be aligned to their designated risk strategy and investment goals.

What are the costs and fees?

We’ve structured our managed investment portfolio to be accessible to investors seeking low fee investing. We have a competitive offering for anyone seeking to invest in a managed account.

For a minimum of £500, you can get access to expert digital wealth management through our Smart Portfolio, which is a fraction of what traditional managed accounts charge.

Smart Portfolios are managed at a fraction of the traditional wealth management costs. Owning a Smart Portfolio will cost you 0.50 management fee, capped at £250, if your portfolio exceeds £50,000.

With us, you also won’t need to be concerned about potential additional costs for setting up your account, rebalancing your portfolio and fees to exit your investment. To ensure transparency and full disclosure, we also show you your total cost of ownership (TCO) before you invest.

We won’t charge you excessive portfolio management fees. You’ll pay a reduced management fee capped at £250 per year. You won’t be expected to pay any hidden admin and performance charges. See how our fees compare to other providers.

What are the pros and cons of managed accounts?

Is a managed investment portfolio right for me?

Whether a managed investment portfolio is for you will require that you think about your risk profile, investment preferences and financial objectives.

• Hassle-free investing: you can choose your level of involvement in setting up your portfolio and monitoring its performance. You can engage with our experts as and when you wish to evaluate your portfolio and switch your allocations
• Credible asset management: we’ll adapt your investment using the asset allocation insights from the world’s leading asset management firm, BlackRock’s model portfolio – at no additional cost to you
• Personalised investment: you’ll get a more diversified portfolio tailormade to your risk profile, and to potentially reach your financial goals within a specified timeframe
• Increased control over your assets: you’ll have access to the assets managed on your behalf. With us, you can switch assets under your managed investment portfolio anytime you wish
• Cost-effective management fee: you can invest in our range of portfolios, whether you’re a budding investor with limited funds or you have a significant deposit

Even though you might prefer to have a portfolio manager to administer your managed account, it’s still important to understand how this type of investment works.

You can access free investment lessons via IG Academy.

5 steps to start investing with Smart Portfolios

1. Open a Smart Portfolio account
2. We’ll build your portfolio
3. Deposit your funds into your account
4. Top up your funds any time
5. Monitor your portfolio’s performance

When opening your Smart Portfolio with us, you’ll need to inform us about your financial objectives, investment preference and risk profile. We’ll then assist you to choose the best portfolio mix to best meet your objectives.

You can make use of our investment calculator to project the performance of your portfolio and find out what your TCO will be upfront. Follow these five steps to start investing with Smart Portfolios:

1. Apply for the account and create an investment account

When you open an account with us, we’ll ask you a few simple questions about your investment goals. This will enable us to tailor your portfolio in a manner that’ll help you reach your financial objectives within your desired time frame.

2. We’ll build your portfolio

Once we know what your investment objectives are, we’ll show you the portfolio with a combination of investments that can best help you achieve your targets.

We’ll use asset allocation insights from BlackRock, a global leader in asset management, to show you the potential performance of each portfolio over time. You can choose to change to portfolios that suit your financial objective. Remember, past performance does not guarantee future returns.

Note that you can open a managed account even if you have other investment accounts with us. For instance, you can have a Smart Portfolio ISA and an share dealing ISA alongside each other and move funds between the two accounts.

3. Deposit your funds into your account

When your portfolio has been set up, you can choose to fund it by debit card, or bank transfer. We’ll invest the funds as soon as they reach your account, provided it’s during market hours.

4. Top up your funds any time

You can top up funds to your investment as and when you wish. This can also include setting up an automatic standing order to add funds to your account. Our experts will rebalance your portfolio on your behalf as the need arises.

5. Monitor your portfolio’s performance

You’ll have full disclosure and transparency of your portfolio’s performance at any time using our intuitive online platform or mobile app.¹ You can also switch between portfolios or withdraw your money at any time you wish – at no cost.

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