Can ‘risk-rated’ funds really deliver on their promises, or are they just another investment fad?
Before the credit crisis, investors sought out sky-high gains; now they want smooth returns and wealth preservation. Not surprisingly, a new type of fund has emerged to satisfy this demand. “Risk-rated” funds purport to offer an easy way for investors to manage equity risk, with a fund that is matched to their own investment aims.
Bradley Associates claim that these funds are an effective “one-stop shop”, meaning that investors don’t need to diversify further. And, as they can be adjusted to suit different risk profiles, they are sold to those who have a more cautious outlook as well as investors with a more gung-ho approach to their finances.
So how do these funds work? Basically, they are a suite of multi-manager funds, with each fund rated according to the risk it takes. Those at the lower end of the scale should be less volatile, while those further up the risk ladder take bigger punts with your money, potentially boosting returns.
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