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Over 70 major additions to investment menus

From the IOOF Product Development Team

Following a comprehensive review process, we are pleased to announce the launch of our new and expanded investment menus (available from the end of February 2009).

While we have increased the list of options available, these are not just more of the same - we have added new asset classes and innovations designed to suit a broader range of clients.

We have steadfastly continued our ‘best of breed’ strategy while evolving our menus to meet new demand such as protected cash, infrastructure, commodities, alternatives and a wide range of specialist funds.

Our approach to investment menu construction

At IOOF we have a simple but powerful investment menu philosophy. Over the past few years we’ve seen many of our competitors add hundreds of options to their menus – seeming to choose quantity over quality. We’re now seeing many of these same platforms cutting their menus back down as a result of economic pressures and failing funds.

At IOOF we believe in maintaining a focussed, best of breed menu which meets the diversification, cost, risk and reward needs of our clients.

We also understand that our clients’ needs change with the times. That’s why as market conditions evolve, and as new innovations take hold, it is essential that our investment menus adapt. At the same time, we place great importance on constructing a menu that is able to support your strategies for the long term.

To meet these challenges, in October 2008 we began our latest major review of the investment menus available on IOOF platforms.

The goals of our latest review

The main focus areas for this review:

  1. To assess the funds on the existing investment lists for suitability and to analyse potential funds for addition
  2. To ensure investment options were diversified by asset class
  3. To ensure fund managers were diversified between larger and smaller providers
  4. To ensure the menus fully catered for the needs of lower cost investors
  5. To ensure the menus were aligned with industry trends and innovations (i.e. cash, infrastructure, commodities, and alternative funds)

The review was conducted with certain important themes in mind. Firstly, the lack of confidence in credit markets highlighted the need for a further breakdown in the cash sector (particularly, within ‘safe’ assets such as term deposits). Secondly, commodities and infrastructure needed to be defined as distinct asset classes to improve diversification within clients’ portfolios and capture the latest global macro movements.

Asset classes were therefore redefined/created to suit the current environment. Managers were then reviewed with this new structure in mind. The four key risks identified and addressed by our asset class review were:

  • Supply and demand
  • The risk and return trade off between asset classes
  • Changes to asset class risk premiums
  • Global macro factors that may affect the returns of individual asset classes

At the same time, we aimed to consolidate our menus into a single list across all IOOF platforms (available to various extents depending on the platform). This process will streamline operations and reporting, provide a robust investment process and add value to advisers’ businesses and clients’ portfolios.

The overall IOOF platform investment option list was expanded from 120 to 200 in order to provide greater choice and flexibility, while still being consistent with our best of breed approach. (The precise number of options available varies by platform.)

A rigorous research process underpins our investment menu

Every single investment option you see on an IOOF platform has been through a consistent, structured and comprehensive screening process:

Stage 1: Initial Screen

Investment options are first screened to indicate their appropriateness across the most essential features. These include, research ratings, product compatibility, level of support, fund flows, service and administration, and so forth. The screen is based on internally developed screening tools and external research.

Stage 2: In-Depth Research

Following the initial screen our Investment Menu Assessment Committee conduct research on the options that have survived the initial screen.

This review includes:

  • Internal multi-factor research
  • Face-to-face Portfolio Manager meetings
  • Validation of external research reports and ratings

From this process we aim to build a list of investment options which are ‘best of breed’ across a broad range of criteria.

Individual investment options on our menus are monitored continuously, but the major update described above is now complete and effective from the end of February 2009.

We hope the new investment menus meet your clients’ requirements and increase the range of portfolios available for you to construct. For more information on IOOF investment menus please contact your Business Development Manager or our Adviser Services Team.