BR report 2018

58 59 MARKET COMPOSITION BY INVESTMENT SECTOR For new BR offers that were opened in 2017/18, financial services , is far more popular at 43%, in comparison to 25% of 2016/17 offers and just 11% of historical offers. This may be connected to the fluidity of the economic and political landscape over the last two years as we head towards Brexit and a growing need for services and advice against that backdrop. It is interesting to note a shift towards specific sectors that have been identified for investment rather than keeping all options open with a General Enterprise strategy. This may as a result of providers looking to differentiate their offerings in an attempt to make it easier for advisers to get an initial understanding of the focus of their main underlying investments focus. The majority of offerings still retain the capacity to diversify across sectors. MARKET COMPOSITION BY INVESTMENT TYPE Although compared to historical offers, 2017/18 figures for Alternative Investment Funds are lower, when looking at 2016 offers, the AIF is making a come back. (See Sector Analysis) ALTERNATIVE INVESTMENT FUND PORTFOLIO DISCRETIONARY PORTFOLIO SERVICE SINGLE COMPANY ENERGY GENERATION FOOD & DRINK GENERAL ENTERPRISE FINANCIAL SERVICES INDUSTRY & INFRASTRUCTURE MEDIA & ENTERTAINMENT PHARMACEUTICALS / BIOTECHNOLOGY SPORT & LEISURE TECHNOLOGY TRANSPORT CHARGES AND FEES “Historically, our focus on AIM has been on the smaller cap end. If you move up the market cap side of AIM, we are seeing some very stretched P/Es, which we don’t like the look of.” — LAURENCE CALLCUT, DOWNING Here we take a detailed look at the fees and charges of BR products. Some of the fees are applied to either investors or investee companies. Our analysis focuses on the total, and we specify when we refer to an investor or investee company fee. When reviewing fees, advisers should ensure that they have all the applicable fees for each offer in order to make like for like comparisons. The fees examined here may not be exhaustive - not only do the levels of fees vary from offer to offer, but so do the types of fees charged and the party they are charged to. AMC BY INVESTMENT STRATEGY ANNUAL MANAGEMENT CHARGE AVG MODE MIN MEDIAN MAX AMC OF HISTORICAL OFFERS CHARGED TO INVESTOR 2017/18 OFFERS AMC OF 2017/18 OFFERS CHARGED TO INVESTOR The most common type of fee is the AMC. Other main types of fees include the Initial Charge, Initial Deal Fee, Exit Deal Fee and Annual Admin Fee. Average AMC of 2017/18 BR offers is 0.83% - this compares with 1.02% for historical offers and 1% for 2016/17 offers. This indicates that AMCs are going down, which could be due to greater competition in the BR market. Advisers should pay attention to how an AMC is specified when assessing fees, as an offer may have two levels of AMC depending on the amount invested - generally, the higher the investment the lower the AMC. Breaking down by strategy, Capital Preservation & Income offers had an average AMC of 1%, this compares with the historical average of 1.73%. Growth offers had an average of 1.25% in comparison to historical offers (1.31%). Perhaps the higher growth AMCs are connected to incentivising managers to maximise growth, and therefore their own fees since they are generally calculated on the NAV. This also aligns the interests of the providers and investors. AVG MODE MIN MEDIAN MAX 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0% AVG MODE MIN MEDIAN MAX 2.5% 2% 1.5% 1% 0.5% 0% 1.02% 1% 1% 2% HISTORICAL OFFERS 9% 12% 12% 66% 1% 2017/18 OFFERS 14% 43% 29% 14% 2017/18 OFFERS 14% 72% 14% HISTORICAL OFFERS 79% 12% 2% 7% 0.83% 1.00% 1.25% 1.25% 0% CAPITAL PRESERVATION & INCOME CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME INCOME 3% 2.5% 2% 1.5% 1% 0.5% 0% 1% 1% 1.25% 0.5% 0% HISTORICAL OFFERS CAPITAL PRESERVATION & INCOME CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME INCOME 3% 3.5% 4% 2.5% 2% 1.5% 1% 0.5% 0% 1.73% 1.30% 1.31% 1.28% 0%