The latest news in investment offerings, financial products and other services relative to wealth advisors and their clients.

Franklin Templeton 
Franklin Templeton this week announced that it has received approval from the Luxembourg regulator Commission de Surveillance du Secteur Financier (CSSF) to launch the firm’s first open-ended strategy focused on private equity secondaries. The strategy will be co-advised by Franklin Templeton and Lexington Partners, a large manager of secondary private equity and co-investment funds.

“This new offering is testament to our long history of innovating and providing investors with unique solutions to meet their evolving needs,” George Szemere, head of alternatives EMEA wealth management, said. 

The open-ended strategy will be Luxembourg-domiciled and provide investors, principally in the wealth channel, access to a diversified private equity secondaries portfolio. The strategy will allow access to an asset class that, until recently, was primarily available to institutional investors and, to a lesser extent, the wider market. It is scheduled to be launched in early 2025, the firm added.

Private equity (PE) fundraising has surged in recent years. However, private equity exits slowed dramatically in 2022 and 2023 and continue to be relatively stagnant. While PE deals and exits have slowed, secondaries activity has picked up as institutional investors seek to rebalance their portfolios, the firm continued.

As institutions find themselves overallocated to private equity with distributions slowing, they are accessing the secondary market to diversify their holdings and meet future commitments. In addition, secondary managers benefitting from significant inventory and institutions’ need for liquidity, have been able to select from broad pools of assets that are seeking attractive investment interests at favourable pricing.  

The secondaries market has grown substantially over the last decade, from $28 billion of market volume in 2013 to about $130 billion in 2024. Secondaries represent a growing and vital part of the private equity ecosystem, providing liquidity, diversification, and potentially shortening the distribution period, the firm said.

“Over the last few years, the industry has made great strides in opening up access to private markets through the introduction of various fund structures. We have been working to develop a product that enables access to private markets while providing a degree of liquidity through periodic subscriptions and redemptions which are supported through a variety of liquidity levers,” Jake Williams, head of international alternatives product strategy, said. “With this new open-ended fund structure, we are pleased that we will be able to offer investors in the wealth channel access to private markets with lower investment minimums and more flexible features.” 

Hargreaves Lansdown
Hargreaves Lansdown has just launched a new Venture Capital Trust (VCT) online investment service in partnership with Octopus Investments and Calculus and Blackfinch Ventures.

The new VCT online service aims to help boost investment in the early stages of dynamic, entrepreneurial UK companies that are a vital area of the UK economy and help more people from across the UK make their money work harder for them, the firm said in a statement.

The new online service brings a straightforward product to the VCT market. As tax bands are frozen and allowances squeezed, for those confident investors who have already hit their ISA and pension allowances, VCTs are great way to get additional tax relief and shelter on investments, the firm added.

“HL’s new VCT online service will broaden our client offering, support the VCT investment market and help shape it for the future. After the commitment made by the government to extended VCTs to 2035, and given the tax changes announced in the Budget, VCTs are a great way for people to invest their money in a tax-efficient way, over the longer term, as part of a diverse investment portfolio,” Emma Wall, head of platform investments, Hargreaves Lansdown, said.

For nearly 30 years, he VCT market has been a vital tool for entrepreneurial UK businesses to obtain the seed funding they need to kick-start their enterprise, which has helped the UK to be one of the best places in the world to start a business. "Using our market-leading position and scale, our VCT service has the potential to help the VCT market grow in the future, delivering favourable returns for investors, and support more businesses at the start of their growth journey,” the firm said.

SimCorp
SimCorp, a financial technology company, has just launched two Axioma global multi-asset class fund allocation models.

The Axioma Fund Allocation Model captures fund investment risk through exposures to a curated set of fund and market category factors and fund specific risks. Meanwhile, the Axioma Worldwide Fund Allocation Model evaluates fund investment risk through a combination of exposures to the Axioma Worldwide Equity Factor Risk Model for equity ETFs and single name stocks, along with a curated set of fund and market category factors. This approach eliminates the need for multiple models, which may miss important cross-correlations among the asset classes, the firm said in a statement yesterday.

“The new Axioma fund allocation risk models offer wide asset class coverage while being designed to use the fewest factors necessary to capture the most important drivers of risk and return,” Ian Lumb, head of analytics product at SimCorp, said.

“Historically, wealth and fund of fund managers have relied on separate off-the-shelf asset risk models that often contained superfluous?factors. The new Axioma fund allocation models are designed to be highly parsimonious, enabling these managers to explain the sources of risk while simplifying the construction of investment portfolios tailored to their specific needs,” Lumb added.

One of the growing needs within wealth management is being able to create or transition portfolios that prioritise after-tax returns and the increased demand for portfolio customisation. The risk models use machine learning to capture the specific returns of funds with similar return dynamics. This feature allows wealth managers to easily identify replacement securities and manage the risks associated with funds tracking the same benchmark. Consequently, the models support the construction of tax-aware portfolios that maximise after-tax returns across various risk levels.

Axioma Fund Allocation Models can also be deployed in other ways, including: tax-efficient asset transitions and proposal creation; unified managed accounts; overlay portfolio management; model portfolio construction and rebalancing; asset allocation; portfolio optimisation; risk attribution; and fund manager differentiation.