Copia, the discretionary management facility for advisers using the Novia platform, is offering the Select Plus range in addition to its existing Select range, both of which are intended for medium- to long-term investors in the accumulation phase of their lifecycle.
Like the Select range, which was launched in November 2016, the Select Plus range is mapped to five different risk profiles.
The portfolios combine Copia’s proprietary quant-based approach to asset allocation with a systematic factor-based approach for underlying funds.
Henry Cobbe, head of Copia, explained: “It’s science, not guesswork.”
What is a factor?
Factors are broad and persistent forces that govern the behaviour of asset classes.
If the asset classes are ingredients, factors are the nutrients, explained Hoshang Daroga, quantitative investment manager at Copia.
Over the past six decades, leading academics such as Nobel laureates Eugene Fama and Kenneth French have identified several meaningful factors in equities.
These are: the market, company size, relative price (or value) and profitability.
Identifying and emphasising these factors in equity portfolios increases their expected returns, the firm said.
Fama and French consult to and sit on the board of an affiliate of Dimensional Fund Advisors.
Including factor-based funds
The existing Select range uses ETFs for each asset class exposure, which are traditional capitalisation weighted.
The Select Plus range uses Dimensional funds, where available, for specific asset classes; such as UK, US, European and Emerging Market equity exposures.
The expectation is that the systematic factor-based approach deployed by these funds has the potential to enhance returns for those asset classes and therefore for the portfolio as a whole.
Furthermore, by diversifying portfolios not only across asset classes and geographies, but also across factors, Copia said it is providing advisers with a differentiated approach to managing risk and return as part of its investment outsourcing solution.
Help advisers match strategy to need
Daroga said: “This is another exciting first for Copia. There are plenty of advisers who use Dimensional funds because they understand and like how a systematic factor-based approach can help diversify a portfolio and potentially enhance returns.
“We are offering that within the framework of our risk profiled multi-asset portfolios to help advisers match investment strategy to their clients’ needs.”
David Jones, head of financial adviser services, Emea, Dimensional Fund Advisors, said: “We are delighted that Copia is launching their Select Plus range of model portfolios using Dimensional Funds.
“We believe that client-focused advice and efficient, value-added access to the capital markets can be a successful combination for both advisers and their clients. Copia’s Select Plus range brings this approach to a new audience.”
