AJ Bell Ready-made portfolios – asset allocation updates

Writer,

We launched the AJ Bell Ready-made portfolios in December 2018 to help you hit the ground running with your investments. Unlike the AJ Bell funds, which we manage for you, the AJ Bell Ready-made portfolios leave responsibility to you for managing your investments over time. Another key difference is that the Ready-made portfolios are built from active funds, while the AJ Bell funds' have a passive approach.

At launch, the two products also had a very different approach to asset allocation (i.e. the split between bonds, shares and other investments), despite having similar objectives. We've now decided to align these two approaches. We’ve updated the Ready-made portfolios so they have the same method of asset allocation as the range of AJ Bell funds – bringing consistency for investors.

What have we changed as a result?

The AJ Bell funds asset allocation approach analyses the expected returns, volatility and correlation of different assets, including bonds, UK shares, overseas shares and alternative assets. It then looks to combine them to create a diversified portfolio for that fund’s level of risk.

To bring the AJ Bell Ready-made portfolio approach into line with this, we’ve made changes to each portfolio’s asset allocation and composition.

Broadly speaking, the main change we’ve made is reducing each portfolio’s allocation to UK shares, and increasing its allocation to overseas shares. We’ve also reduced the allocation to alternative assets.

New allocation:

  Bonds UK shares Overseas shares Other
Cautious 68% 6% 20% 6%
Balanced 33% 16% 45% 6%
Adventurous 8% 23% 66% 3%
Income 33% 16% 45% 6%

Change:

  Bonds UK shares Overseas shares Other
Cautious (2%) (9%) 15% (4%)
Balanced 0% (19%) 23% (4%)
Adventurous 2% (17%) 17% (2%)
Income 8% (19%) 25% (14%)

While this may appear to be a large change, we believe that having a consistent approach to asset allocation makes sense in the long run. Future changes to the asset allocation are also likely to be much less dramatic in the coming years as a result.

What underlying funds have we changed?

Given these asset allocation changes, we’ve naturally had to make changes to the weights of the funds within each portfolio to ensure they remain well balanced. As a result, we’ve removed some funds and added others. Here are the fund changes we’ve made to each portfolio:

Cautious portfolio: No funds added or removed, but weights adjusted to reflect the new asset allocation.

Balanced portfolio: Removed the Royal London Corporate Bond fund because of a reduced asset allocation to bonds. Adjusted weights of UK shares to reflect its reduced allocation, and replaced the Evenlode Income fund with the Ninety One UK Alpha fund. No funds added or removed for overseas shares, but weights adjusted.

Adventurous portfolio: Replaced the Evenlode Income fund and Franklin UK Mid Cap fund with the Ninety One UK Alpha fund, to reflect a reduced allocation to UK shares. Because of an increased weight to overseas shares, introduced the ASI Global Smaller Companies fund to complement existing managers.

Income portfolio: Alongside the existing Evenlode Global Income fund, added the Schroder Global Equity Income fund and JP Morgan US Equity Income to reflect the significantly increased allocation to overseas shares. No other fund changes, although weights adjusted to reflect the new asset allocation.

It’s worth noting that despite removing the above funds, they all remain on the AJ Bell Favourite funds list. The reasons we’ve chosen them for our Favourite funds list remain unchanged.

What should you do?

We wanted to let you know about these changes to keep you up to date. If you hold a Ready-made portfolio, remember that nothing will automatically change with the investments in your account. Responsibility for managing your portfolio falls to you, and it’s up to you whether you choose to update it or keep it as it is. If you’d like to view our updated portfolios, just visit our Ready-made portfolios page.

We hope you find this update useful. Please remember that it falls to you to monitor and manage your own investments and to make any changes you think are necessary. Keep in mind this is information only, and not a personal recommendation to buy or sell any of the funds referenced above.

Find out more about the Ready-made portfolios

Important information: The value of investments and any income from them can change, and you could lose money as well as make it. This article does not constitute advice regarding the suitability of investments. We don’t offer advice, so it’s important you understand the risks. If you’re not sure, please speak to a financial advisor.


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Written by:
Ryan Hughes

Ryan Hughes is Head of Active Portfolios at AJ Bell. He has 20 years of experience in finance and investments and started his career working as a financial adviser before becoming an investment analyst and discretionary fund manager as well as twice being named one of the most influential financial advisers in the UK. In 2006, Ryan joined Skandia Investment Management as a fund manager, sitting on both the investment committee and global asset allocation committee before then joining Apollo Multi Asset in 2013. In October 2016, Ryan joined AJ Bell to help establish the investment research capability.