Strategy & Practice Management

St. James’s Place to move into passive funds

St. James’s Place Wealth Management (St. James’s Place), the largest wealth management firm in the UK, is reportedly moving into passive fund products.

The strategy, according to an article by the Financial Times, comes as a product of the firm’s desire to compete more evenly against firms entering the market, such as Vanguard, one of the world's largest investment companies. 

St. James’s Place is said to be in conversation with a number of asset management firms with the aim of launching its own passive investment fund products; these would benefit from the same low cost as those enjoyed by index tracker funds. However, St. James’s Place’s offerings would not replicate the index entirely. 

The rollout of the passive funds would be a new direction for the firm, which traditionally has offered investors active stock-picking solutions within its house-branded funds. 

The change in its strategy marks a response from the wealth manager as it faces new competition in the market, namely in the shape of the aforementioned Vanguard, which is reportedly planning to cross the pond and enter the wealth manager’s home market. 

In the same vein, Schroders, a global investment manager, and Lloyds, a British retail and commercial bank, recently announced the launch of a joint wealth management business, named Schroders Personal Wealth. 

By bringing together two leading UK based companies – one from banking and one from investment management – Schroders Personal Wealth aims to combine Lloyds’ customer base, multi-channel distribution and digital capabilities with Schroders’ investment and wealth management expertise and technology capabilities to offer comprehensive wealth management, financial planning and advise services, according to the firms’ collateral on the joint business. 

Planned to be launched within the next year, the rules-based funds will incorporate ESG ideologies, adopting a low-carbon approach, a feature reportedly made possible due to St. James’s Place’s active management overlay. 

Rob Gardner, Director of Investments, St. James’s Place Wealth Management, said: “The feature of passive I like is that it’s low cost, while what I like about active is that you can be an active owner.” 

“Ultimately, this is about client outcomes. Our key focus is on creating high-capacity, low-carbon solutions as part of our broader commitment to responsible investing,” said Gardner. 

Speaking of the future, and the need to scale the firm’s fund offerings, Gardner commented: “The bigger you get, the more you have to move to a core-satellite approach using passive building blocks combined with active exposure. Active management doesn’t scale infinitely. We might reach GBP250 billion in assets in the next few years, so adding capacity is important.”