AFH Financial has signed up six asset managers to launch a new fund range it said will be 15-20% cheaper than vehicles the firms run for the wider retail market.
AFH, which recently reached £3 billion of assets under management (AUM) and is targeting £5 billion by 2020, hopes to leverage its size to get institutional prices for its clients.
AFH has so far signed agreements with Henderson, Jupiter, Lazard, BlackRock, JP Morgan Asset Management and Schroders.
More details on the mandates will be revealed as they become available to AFH clients later in the year, with the group saying it plans to launch more in the future.
The move will be seen as direct competition to St James's Place, which runs 34 segregated mandates for it clients.
The firm said that all six segregated mandates will not involve a contractual tie down. This means the managers can be replaced, allowing AFH to maintain its independence.
‘The advantage of doing something like this is that you don’t have the capital gains tax issues involved in selling out of a fund that isn't performing well,’ said AFH Financial’s CEO and former Citywire cover star, Alan Hudson.
‘Additionally, we have significant savings for the same level of performance and have far more information when we are doing due diligence for clients on what makes up these portfolios.’
Hudson hopes that eventually most of AFH Financial’s AUM will be held in segregated accounts. He believes that as the market continues to consolidate that this type of deal would become more prevalent.
‘It quite difficult to replicate this strategy for smaller IFAs, as they either don’t have AUM or are not quickly growing their assets. [Also] they don’t have the necessary discretionary permissions and these act as a barrier of entry,’ Hudson explained.
‘This will set larger IFAs from smaller ones and fund houses know this and will align their interest with larger businesses like ourselves over long run.’