10 things to love about PruFund

29 Aug 24 7 min read

Launched nearly 20 years ago by Prudential, the PruFund range now holds assets of close to £60 billion. Used by more than 450,000 savers and investors across the UK, Paul Fidell, Senior Investment Specialist, M&G Wealth, explains why PruFund has become an essential mainstay of the adviser toolkit.

1. Built for growth with less volatility

Most investors and savers need something that can help grow their capital – both to maintain its real value against inflation and provide some additional return. That requires investing in stock markets. For clients who haven’t stepped beyond low-risk savings accounts, that can sometimes be a daunting prospect.

Prudential's PruFunds aim to grow your clients' money over the medium to long term (at least 5 to 10 years) with a view to providing them with a smoother investment journey. That's thanks to our smoothing mechanism and multi-asset approach, spreading the risk to your clients' investment, which can help provide more stable returns.

This has made PruFund a very popular entry-point to help ease novice investors into the world of investing. It’s also a valuable core holding for any client that’s seeking investment growth but wanting a smoother return profile, including investors approaching or in retirement.

Source: FE fundinfo 25/11/2004 – 28/06/2024. PruFund Growth Life (onshore) vs ABI Mixed 20-60 (life) performance. Please remember that past performance is not a reliable indicator of future performance. The figures are intended only to demonstrate performance history of the fund over the period shown. The PruFund Funds include a representative fund charge of 0.65% pa and any further costs. They take no account of product or advice charges. The application of charges and further costs will impact the overall performance. Please note that our charges any further costs may vary in the future and may be higher than they are now. Fund performance is based upon the movement of the daily price and is shown as total return in GBP with net income reinvested. The value of your investment can go down as well as up and you may not get back the amount you put in. Performance is shown on a bid for bid basis.

2. Transparent and easy to understand

PruFund isn’t the only investment solution that offers to smooth out returns for nervous investors. But we believe it is one of the easiest to understand. For example, whereas traditional with-profits funds have a complex system of discretionary bonuses and market value adjustments, PruFund funds simply have an ‘expected growth rate’ (EGR) that’s set each quarter – based on forward-looking analysis - and applied each day.

Should rises or falls in the underlying portfolio value be significantly higher than the EGR, a unit price adjustment kicks in. This adjustment is also based on a strict, non-discretionary formula. As well as clearly stating the EGRs for each fund, the rationale for any change to the EGR is also made explicit. So, it’s all highly systematic and straightforward to explain to clients.

3. Parent's capital strength

As independent consultancy agency AKG Financial Analytics commented on Prudential Assurance Company Ltd, “As one of the UK's largest and strongest life companies, PAC continues to show significant resilience in the wake of challenging economic, legislative and regulatory conditions. It has retained focus and increased its market share, whilst continuing to demonstrate its appetite for key segments of the UK market, specifically the Pre- and Post-Retirement space.”

The £60 billion of assets that support PruFund are held within a larger central pot totalling £117.9bn, enabling it to benefit from exceptional economies of scale and access to investment opportunities beyond the scope of many other investment managers. Plus, PruFund has access to all of M&G’s investment team called M&G Treasury & Investment Office, ensuring it can apply expertise across all key asset classes to these multi-asset funds.

4. Long-term, forward-looking focus

It is sometimes said that investing is a marathon, not a sprint and that investors can be divided into roughly two types – long term investors or short-term speculators.

The uncomfortable challenge for long term investors is that there can often be periods of short-term market volatility along the way. The expected growth rate for PruFund is focused on what is expected to happen over the long term – up to 15 years ahead, and the smoothing mechanism helps deal with the short term.

So investors can participate in potential long-term performance trends with less short-term volatility.

5. Strong performance record

PruFund has lived up to its commitment to deliver growth with less volatility. PruFund Growth and even the low-risk PruFund Cautious both have outperformed the average return from the Mixed Investment fund sector over 3, 5 and 10 years as shown in the graphs below.

We can’t predict the future. Past performance isn’t a guide to future performance.

Source: FE fundinfo 31/06/2021 - 30/06/2024. 3 year scatter chart, annualised. Please remember that past performance is not a reliable indicator of future performance. The figures are intended only to demonstrate performance history of the fund over the period shown. The PruFund Funds include a representative fund charge of 0.65% pa and any further costs. They take no account of product or advice charges. The application of charges and further costs will impact the overall performance. Please note that our charges any further costs may vary in the future and may be higher than they are now. Fund performance is based upon the movement of the daily price and is shown as total return in GBP with net income reinvested. The value of your investment can go down as well as up and you may not get back the amount you put in. Performance is shown on a bid for bid basis.

Source: FE fundinfo 31/06/2014 - 30/06/2024. 10 year scatter chart, annualised. Please remember that past performance is not a reliable indicator of future performance. The figures are intended only to demonstrate performance history of the fund over the period shown. The PruFund Funds include a representative fund charge of 0.65% pa and any further costs. They take no account of product or advice charges. The application of charges and further costs will impact the overall performance. Please note that our charges any further costs may vary in the future and may be higher than they are now. Fund performance is based upon the movement of the daily price and is shown as total return in GBP with net income reinvested. The value of your investment can go down as well as up and you may not get back the amount you put in. Performance is shown on a bid for bid basis.

6. Minimises 'sequencing risk' for income seekers

Because of its smoothing mechanism, PruFund is widely valued for clients coming up to retirement who still need to grow their capital but can’t afford to take too much risk with their accumulated pot.

PruFund’s extra stability can also be especially helpful when retiring clients wanting to start taking an income. That’s because taking a regular income from a fund that’s dropping in value can see the remaining pot rapidly diminish, effectively crystallising losses with little room to recover (what’s known as ‘sequencing risk’).

By delivering smoother performance, PruFund helps to minimise the risk of income being taken just as the fund’s value is falling.

Source: FE fundinfo 31/06/2014 - 30/06/2024. 10 year withdrawals chart, annualised. Showing both return and volatility of PruFund Funds. Please remember that past performance is not a reliable indicator of future performance. The figures are intended only to demonstrate performance history of the fund over the period shown. The PruFund Funds include a representative fund charge of 0.65% pa and any further costs. They take no account of product or advice charges. The application of charges and further costs will impact the overall performance. Please note that our charges any further costs may vary in the future and may be higher than they are now. Fund performance is based upon the movement of the daily price and is shown as total return in GBP with net income reinvested. The value of your investment can go down as well as up and you may not get back the amount you put in. Performance is shown on a bid for bid basis.

7. Exceptional diversification – including illiquid assets

All PruFund strategies take a multi-asset approach, providing highly diversified portfolios that can act as the risk-managed core for almost any client strategy, all supported by the M&G Treasury and Investment Office’s management and oversight.

Asset allocation is achieved using both in-house and external funds and segregated mandates (thus providing a further layer of diversification). Alongside global equities, bonds, and cash, PruFund’s scale means it can invest directly in assets outside the reach of other multi-asset funds such as major property and infrastructure projects.

As an insurance fund, it also has greater regulatory freedom to invest in these more illiquid assets than, say, retail OEIC funds. The overall size of PruFund means it can invest in these types of assets without compromising the overall liquidity of the fund.

8. Freedom to allocate to external fund managers

PruFund makes full use of the investment skills of M&G Treasury and Investment Office, which has around 70 investment professionals managing assets. But the team also has flexibility to draw on external investment expertise to help optimise investment return and capture potential across asset classes. External managers are selected on the basis of top-quartile performance and reviewed regularly to ensure best-in-class capabilities.

9. Comprehensive range with clear risk-reward choices…

PruFund features a range of multi-asset strategies to meet the risk-reward needs of almost every kind of client. These are PruFund Growth, PruFund Cautious and a range of five risk-managed strategies that have stated targets both for growth AND volatility, making it very easy to align with a client’s return goals and capacity for loss (and demonstrate this for consumer duty requirements).

10. …including funds targeting positive impact

PruFund also delivers a smoothed fund range for clients wanting to target social and environmental impact. PruFund Planet features five funds that, alongside investing in companies with strong ESG credentials, proactively look to invest in opportunities that can deliver positive outcomes in areas such as climate action, health, education, the environment and social inclusion. Again, each PruFund Planet fund has a different risk-reward profile, so they can be clearly aligned to each client’s risk profile.

Summary

There are clear reasons why PruFund has become a perennial favourite with advisers and clients over the past two decades. Then as well as today investors face challenges – from the return of persistent inflation to geopolitical risks. As they do, we believe the value of a multi-asset fund range that enables clients to target long-term growth potential while smoothing market volatility is greater as ever.

The value of investments can go down as well as up, your client may not get back what they have paid in.

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"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at 5 Central Way, Kildean Business Park, Stirling, FK8 1FT. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company Limited. The Prudential Assurance Company Limited and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc which is a holding company registered in England and Wales with registered number 11444019 and registered office at 10 Fenchurch Avenue, London EC3M 5AG, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.