St James’s Place’s Polaris fund range has seen total client assets swell by £9billion in just two months, with its size having overtaken industry giant Vanguard’s LifeStrategy range.
The range, made up of Polaris 1, 2, 3 and 4 multi-asset funds, now has assets of £45.6billion, compared with £42.8billion for Vanguard’s popular LifeStrategy range.
That’s despite Polaris’ ongoing and entry fees being far higher than those for Vanguard’s LifeStrategy funds – and it only launching in November 2022.
Biggest fund: St James’s Place’s Polaris fund range has surpassed Vanguard’s LifeStrategy with AuM of £45.6bn
Investors can expect to pay an annual charge of 1.52 per cent for Polaris 1, 1.62 per cent for Polaris 2, 1.67 per cent for Polaris 3 and 1.72 per cent for Polaris 4.
In comparison, LifeStrategy has fees of 0.22 per cent, as well as an account fee of 0.15 per cent.
SJP’s Polaris funds are actively managed, whereas Vanguard offers passive funds.
SJP also currently has a combined fee structure, which means that advice, product and management charges are rolled into one.
This means customers also get advice for the money they pay. The firm is currently in the process of separating these charges, which it says will reduce what customers pay in many cases.
A spokesman for St James’s Place said: ‘Comparing the Polaris range fees to Vanguard’s LifeStrategy range is not a like for like comparison.
‘Vanguard is 90 per cent invested in index funds while Polaris is mostly actively managed with an active overlay – and this is reflected in the associated fees.
‘Under our current charging structure, clients pay a single ongoing charge, which accounts for the cost of external fund managers (ranging from 0.43 per cent to 0.47 per cent), advice and administration costs.
‘By contrast, other managers, such as Vanguard, only take into account fund manager costs, meaning that to compare like for like with the Polaris charges, you must also consider Vanguard’s platform fees and associated advice costs.’
SJP also charges a 5 per cent entry fee for new customers, which it says is largely made up of charges for an initial meeting with an SJP adviser.
Juliet Schooling Latter, research director at Chelsea Financial Services said: ‘Upfront fees should be a relic of the past, and a 5 per cent charge feels especially excessive.
‘Ultimately, investors should evaluate all their options carefully, prioritising value for money in their investment decisions, as fees can eat away at investment returns over time.’
For existing SJP clients, however, there is no 5 per cent fee. The likelihood is that a considerable amount of the asset growth has stemmed from existing clients transferring their assets to the Polaris funds.
Given the range’s track record, it is understandable why existing clients might make this switch, and it would account for much of the growth in AuM.
Popular product: Polaris funds have generally performed better than SJP’s InRetirement funds
The spokesman said: ‘The Polaris range has grown in value substantially since its launch in November 2022, as a result of inflows from both new clients and existing customers.
‘Its performance, AuM and inflows demonstrate that our clients and partners believe in SJP’s asset allocation process and investment management approach and highlight the value of and demand for trusted financial advice.
‘The Polaris range has performed strongly since inception and better than similar funds run by our peers, or indeed representative private client returns.’
How does performance compare?
The range’s highest risk funds, Polaris 3 and Polaris 4, have returned 11.79 and 13.38 per cent, respectively, over the last year, according to Trustnet data.
This reflects outperformance of their benchmark, but trails their Vanguard equivalent. Vanguard’s figures are net of its management fees, while the figures for Polaris are net of all SJP fees.
LifeStrategy 80% – which like Polaris 3 targets an 80 per cent allocation to equities, with the remaining 20 per cent in other assets like bonds – has returned 18.1 per cent over the last year.
LifeStrategy 100%, typically a 100 per cent equity allocation like Polaris 4, is up 20.7 per cent.
A similar theme can be seen in each firm’s lowest risk funds, though it should be noted that as benchmarks and strategies differ so too will performance.
Fund | Return over past year (%) |
---|---|
LifeStrategy 20% | 10.8 |
LifeStrategy 40% | 12.9 |
LifeStrategy 60% | 15.5 |
LifeStrategy 80% | 18.1 |
LifeStrategy 100% | 20.7 |
Polaris 1 | 8.4 |
Polaris 2 | 10.1 |
Polaris 3 | 11.8 |
Polaris 4 | 13.5 |
IA Mixed Investment 0-35% Shares | 10.5 |
IA Mixed Investment 20-60% Shares | 12.3 |
IA Mixed Investment 40-85% Shares | 14.7 |
Source: Trustnet |
What has enabled Polaris to enjoy the growth that it has?
The key to growth, according to AgeWage chair Henry Tapper, is trust.
He told This is Money: ‘What makes people buy into Polaris is not necessarily the quality of the product, but rather the quality of the sales.
Despite the fees, SJP is able still draws new clients and retains old ones who want to commit their money to a firm they have faith in.
‘SJP invest a great deal into building trust in their products. This trust is so valuable that they can sell the same products at a higher price,’ Tapper said.
‘They have customers who trust them, or have been recommended SJP products by someone who has had a good experience with them.’
SJP’s spokesman said: ‘People opt for Polaris and our wider services because they want advice and an ongoing service that helps them achieve their financial goals.
‘While the services offered by Vanguard suit many (and there are rightly options available in the marketplace for DIY investors), they do not compare to financial advice, which also delivers many wider benefits from financial resilience and planning for inheritance, to discovering missing pension pots and unused tax allowances.
‘Indeed, a study by the International Longevity Centre found that those who take advice, regardless of initial wealth, are on average £47,000 better off in retirement, and also benefit from non-financial benefits including greater control, reassurance and peace of mind.’
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