MARKET RESEARCH - SMOOTHED FUNDS

The Smoothed Funds Survey provides a valuable look at adviser's current opinions, utilisation, and strategies regarding smoothed and with-profit funds.

Smoothed Funds Survey: Insights into Adviser Views and Usage

​The Smoothed Funds Survey reveals a nuanced landscape of adviser attitudes, usage patterns, and strategic preferences surrounding smoothed and with-profits funds. With a 100% completion rate from 34 respondents, the data offers a useful snapshot of current thinking in the adviser community.
A strong majority (85%) of advisers reported being very familiar with the term “Smoothed Fund,” and nearly 60% felt very confident explaining it to retail investors. This suggests that smoothed funds are well understood within the profession, even if their application varies. One adviser noted, “I use smoothing for many clients, often as a mix of assets—no risk, medium risk, then add-in some smoothing,” highlighting the role of these funds in diversified strategies.
When asked about the importance of including smoothed funds in their centralised investment or retirement propositions, 65% rated them as important or very important. However, sentiment was not universally positive. One respondent remarked, “I don’t think they are suitable. I think they are the same underlying assets and the same risk,” reflecting scepticism about their distinctiveness.
The survey explored client segmentation, revealing that smoothed funds are most commonly used for cautious investors, those in decumulation, or clients with low capacity for loss. “Clients looking to minimise sequencing risk during retirement and/or want a more predictable return profile,” said one adviser. Another added, “Primarily for those clients with very low appetites for risk and acceptance of volatility.”
Interestingly, 77% of respondents confirmed using smoothed or with-profits funds for at least some client segments. Yet, when asked how often these funds play a role, only 32% said often, and just one respondent said all the time. This suggests that while smoothed funds are part of the toolkit, they are not universally applied.
Blending strategies were also explored. Over half of advisers preferred a 30/70 split between smoothed and multi-asset funds for balanced risk profiles. The rationale was clear: “To get a combination of downside protection and long-term growth,” cited by nearly three-quarters of respondents. However, 35% said they never blend smoothed funds with multi-asset portfolios, indicating divergent views on integration.
The concept of a managed portfolio service (MPS) combining smoothed and multi-asset funds was met with cautious optimism. Over 60% expressed moderate to strong interest in such a solution, with one adviser commenting, “This sounds like a good alternative to Pru fund.” Others were more reserved, citing concerns about opacity and cost.
Finally, the survey surfaced broader reflections. One adviser observed, “From the late 1970s/1980s onwards the process was to move from With Profits (bundled) investments to stand-alone specialist funds (unbundled)… I am not surprised that some IFAs are resorting back.” This historical perspective underscores the cyclical nature of investment trends.
In summary, while smoothed funds are well understood and selectively used, their role remains context-dependent. Advisers value their ability to manage volatility and sequencing risk, particularly for cautious or decumulating clients. Yet, concerns about transparency, cost, and suitability persist, suggesting that further innovation and education may be needed to broaden their appeal.

Editorial note: survey results have been summarised with assistance from AI.