Lifestyle funds have not been without their fair share of flak so before you make the decision to move from 'manual control' to 'autopilot' make sure you know what you are buying into. Lifestyle fund ranges are available from insurance companies such as Scottish Life, Prudential, Legal & General , Standard Life and Aegon. Plus, here are a couple of examples of lifestyling fund ranges from fund managers F&C and Fidelity:
F&C's Lifestyle Funds
F&C has four lifestyle funds which are managed on a day-to-day basis by the asset manager's multi-manager team.
The funds are the Lifestyle Balanced Fund, Lifestyle Cautious Fund, Lifestyle Defensive Fund, and Lifestyle Growth Fund. All four funds are managed to provide consistent returns over the long-term by generating small amounts of outperformance on a regular and frequent basis.
The funds have a total expense ratio (TER) which is capped at 1.99 per cent. The funds can hold exposure to oeics and unit trusts across the fund industry and are sold via independent financial advisers (IFA).
The portfolio of each fund is constructed in such a way that its asset allocation is aligned with a defined investor risk profile, which in turn can be identified during the advisory process through the application of a risk profiling tool.
Asset allocation of F&C Lifestyle Balanced Fund
| Asset | % |
| UK | 43 |
| Europe | 8 |
| North America | 10 |
| Japan | 5 |
| Pacific ex Japan | 5 |
| Emerging markets | 5 |
| Property | 8 |
| UK Corporate Bond | 16 |
Fidelity
Fidelity offers target funds which operate on a similar basis to traditional lifestyle funds by aiming to reduce risk as the member approaches retirement. The funds are single multi-asset funds and not portfolios of funds and are set up with a particular retirement horizon in mind for each fund. The manager starts off by holding a large proportion in equities and then moves into 'safer' assets as the 'target date' approaches.
"The fees reduce over time. Funds start out with an annual charge of 1.5 per cent and then go down as the fund moves into less risky asset classes, eventually ending up with a fee of 0.85 per cent when they hit maturity. The Fidelity Target 2010 fund is now running at this cost," says Rob Fisher, head of UK personal investments at Fidelity.
The portfolio manager can choose from 90 funds within the Fidelity range.
Asset allocation of Fidelity Target 2010 Fund
| Asset | % |
| Bonds - UK | 46.1 |
| Cash | 30.2 |
| Equity - UK | 15 |
| Equity - Europed ex UK | 3.1 |
| Equity - North America | 2.8 |
| Equity - Japan | 1.4 |
| Uninvested Cash | 0.8 |
| Other | 0.6 |
