Performance benchmarking service ARC has launched the ARC Inheritance Tax Portfolio Index, tracking the returns of tax efficient mandates.
The company has collated data from 10 businesses managing portfolios qualifying for business property relief (BPR) to create a series with five years of historical performance, net of fees.
Over the full term to December 2017 the index returned 132.8% versus the ARC Sterling Balanced return of 34.8%. Maximum drawdown of near 12% was almost twice mainstream products, however.
The use of BPR as a screening criteria ensured the company excluded funds at the less-liquid end of IHT planning, said the company’s head of research Dan Hurdley.
He added that the nature of IHT planning, which incentivises investment in early stage businesses and those which may otherwise struggle to access capital, presented particular challenges, however.
‘There is a lot of dispersion in the data due to the high volatility of some of the holdings and the relatively concentrated nature of these equity-only portfolios,’ said Hurdley.
There was a 10% spread between the top and bottom quartile of five year returns, versus 2% on its GBP Equity Risk PCI.
‘All entrants have submitted portfolios that are specifically investing in stocks that they believe will be eligible for business property relief (BPR) for inheritance tax purposes.
‘Clearly there will be some small cash holdings in the portfolios, but the premise is that they must be aiming for BPR, not just a general AIM portfolio, for example. This means we are comparing like with like.’
He thanked contributors, who include major private client generalists such as Brooks Macdonald, Charles Stanley, Investec and JM Finn, as well as specialist planners such as Smith & Williamson, Stellar Asset Management and Blankstone Sington, for their ‘leap of faith’ in sharing their data without knowing how they would compare.
The company is now eliciting further data contributors.