Dynamic Fund Control

Since 1.9.04. we have used a system which we have branded as DYNAMIC FUND CONTROL which is a process which involves regular fund switching within an investment group and has a tremendous track record over the last 11 years. The system we are using is based on a process that has been available to IFAs over a period of just over 11 years but has not been very well marketed or highly publicised. We are one of only 30 IFA firms throughout the country who use the data upon which the system is based. In fact we are the only IFA firm within a 50 mile radius of Milton Keynes that used the system.

Basically it is a very simple system of tracking the trend in investment performance for funds, otherwise known as the moving average, in fact the weighted moving average, of a fund's performance over the last six months on a rolling basis. What this means is that instead of just simply looking at past performance for a fund you are looking at the trend over a six month period and where the trend line is the most steep for the top performing fund that signals a switch into that fund out of the previous fund you were invested in. This system has nothing whatsoever to do with economics, politics, geography, industry, sector or anything else. It is a purely mathematical system with a fantastic track record. The average compound return using Dynamic Fund Control has been in excess of 20% per annum compound over 11 years.

This is completely opposite to the asset allocation approach in that you do have all your eggs in one basket because 100% of your money is invested in one fund at any one time. The fund that the money is invested in at any one time tends to be what would be known as, or what would be described as, a more adventurous or higher risk fund but these are the funds that give you the outperformance. As an example some of the funds that the system has been invested in over the last 18 months have included Barings Eastern Europe, Invesco Perpetual Latin American Growth, Invesco Perpetual Japanese Smaller Companies and Merrill Lynch Gold & General. Whilst this may appear risky, because there is an automatic signal when to switch into the fund and when to switch out, what happens in practice is that when a fund is performing well you switch in and obtain the momentum of the investment performance and once the trend reverses and the fund starts to lose momentum you are then signalled when to switch out. In practice in a busy year you may get 6 – 8 switch signals and sometimes you may get as few as 1 or 2. The signals are given to you by us usually by email but can also be by letter. As this is not a discretionary portfolio management service you decide whether or not to make the switch following the switch notification from us. We charge 1% per annum of the value of the investment in excess of any normal commissions we would otherwise be paid and that is subject to a minimum fee of £100 plus VAT per month. This you would need to pay us by monthly standing order or out of the fund if that choice is available. For pensions the fee can usually be paid out of the fund especially with Skandia Life and for some but not all investment funds.

Whilst these returns are very pleasing they are of course not guaranteed and at times the investment performance can be fairly volatile, in other words prices can rise and fall fairly sharply at times. Nonetheless we remain very confident that over the longer term the returns will continue to be very pleasing. In fact using Skandia as the investment house and using Dynamic Fund Control over the period of ten years and nine months to October 2005 the returns on the Skandia pension using this system have been in excess of 600% cumulative!

We have had many delighted clients over the last 18 months who could testify how successful the system is. One of our clients invested £60,000 in October 2004 and by September 2005 it had risen in value to £97,000. Another one invested £105,000 into a pension fund which was worth £155,000 12 months later. We have a number of success stories like this. 

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