Toby Hester, Deputy Chief Product Officer at Wesleyan, explains how traditional With Profits funds are evolving for a modern market.
Traditional With Profits funds have been a long-standing institution in the investment world. Designed to smooth the ups and downs of market performance by keeping back profits in times of high performance ready to redistribute when markets fall, it ‘smooths out’ the peaks and troughs of investments over time.
The ‘smoothing’ feature is making With Profits a popular choice in the current economic climate, especially among those seeking stability and a calmer investment journey that avoids the day-to-day fluctuations in value. It’s also popular with those during decumulation thanks to its reduced sequencing risk and volatility drag.
In recent years With Profits have grown in popularity and the technology behind them has evolved too, opening up the new generation of With Profits to a wider audience.
Powering up: getting With Profits platform ready
First created in the early 1900’s, With Profits funds have had to evolve to keep pace with the modern investment market. These changes have included unitising, creating computer led systems, connecting online, and most recently moving on to platforms used by UK independent financial advisers.
Traditionally the ‘smoothing’ of With Profits was managed manually with actuarial judgement applied to the payouts given, so getting these ready for platform has posed hurdles.
The first of these is creating a ‘one price’ set up. The new generation of With Profits funds keeps each unit at a single price to allow investors and IFAs to see how the fund is performing in near-real time, like other common investment products. This makes it easier to integrate into portfolios.
Flexibility is key for IFAs and their clients and in the past With Profits have been a more complex product with less flexibility than other funds. Delays such as actuarial adjustments or market value reductions (MVR) have historically made it difficult to get a clear view of the fund price.
However, the evolved on-platform With Profits Growth Fund that Wesleyan has created is different. It is a single priced fund that you can cash in as and when required with just a day’s notice. What’s more the price is transparent, and with no MVRs or surrender penalties, investors have flexibility. As an on-platform product, there are options to switch further into the market or out as cash when required.
Wesleyan’s With Profits Growth Fund is an example of an on-platform fund that has evolved to create the next generation of these funds – delivering for advisers and giving meaningful results to clients.
The Wesleyan With Profits Fund holds more than £4bn of personal investments and is actively managed by our in-house award-winning Investments team*. For SIPP and ISA investors, the fund has achieved a cumulative return of 75% over the last decade, net of fund charges (as at 30 Sept 2023).**
The evolution of With Profits means that now, more than ever before, it’s an option for everyone looking to invest in the market and manage day-to-day volatility.
An edge in the market
The Wesleyan With Profits Growth Funds can be held and managed as part of a portfolio on independent platforms - currently Novia and Nucleus Wrap - eliminating any headache for IFAs who previously had to handle them separately.
Being available on platform means smoothed With Profits funds are now at clients’ and advisers’ fingertips. This makes it easier than ever before for clients to invest in them, potentially opening them up to many more people who could benefit from their performance.
The value of your investment can go down as well as up and you may get back less than you invested.
*Wesleyan’s Investments team have won multiple industry awards, including Responsible Investor of the Year at the Insurance Asset Risk Awards 2022 and Investment Team of the Year in 2023.
**Source for cumulative returns: Wesleyan With Profits Growth Pension Fund Series A Factsheet