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The Wealthify Way to Fund Research

Learn more about our fund selection.
Notepad and glasses on table | Wealthify
Reading time: 5 mins

According to Morningstar data, there are over 7500 funds that are available for UK investors to purchase[1]. Now, consider that the entire FTSE All Share Index comprises just over 600 investable companies, and you will get an idea of the sheer amount of choice that faces investors. This is a daunting proposition for anyone, whether new to investing or not[2].

Why are we telling you this? Because fund selection is critical to ensuring our plans only include best-in-class funds that give us the best chance of reaching your objectives. So, how do we decide what best-in-class is? At Wealthify, we use a detailed and rigorous fund research framework that combines technology and humans to provide in-depth insights and research that power our success.


Fund screening
The process starts with a screening of funds that specialise in certain investments, such as the global shares I mentioned above. This whittles the available options down to funds that meet our minimum requirements, such as a 3-year track record, the monetary amount in the fund and performance on key metrics (ESG for instance) where applicable. It’s important to note that this framework is consistent across both our Original and Ethical Plans with tweaks to adjust for the differences. For example, we don’t have any minimum ethical requirements when looking at funds to include in our Original Plans.


Fund scoring
Once this screening is done, the fun begins! We take it upon ourselves to investigate the merits of each fund that comes through the filtering process – and this is all done by humans as algorithms can only take you so far. We do this by scoring the funds and engaging with fund managers in targeted and interactive meetings. Sometimes a diamond can be seen very clearly on the surface, but in most cases, one needs to dig a bit deeper to find real value. In these meetings our aim is to build relationships with fund providers, but we also make sure we’re asking all the difficult questions to get to the heart of the offering.


The Four Ws
We frame our in-house fund research process according to the four Ws of the Wealthify Way – the fifth W is what we hope to culminate in a Winning Formula! This framework is applied to each fund in a unique yet consistent way to isolate only the best in-class funds. So, what are the four Ws?

Why (is this fund special)?
We always start with the ‘Why?’. Inspired by the popular author, Simon Sinek, in this section we look at the overall qualities of each fund as we try to understand why, or why not, it is a special offering. By special, we mean it has long-term advantage in one or more areas, but most importantly that when we look at the big picture, the fund’s characteristics can drive long-term results. Essentially, we are trying to pinpoint how a fund performs on the most important pillars relative to the market and peers.


Who (are the people that oversee the fund)?
You can’t underestimate the importance of having the right people steering the ship when it comes to your investments. In this area, we look at everything from the overall company to the actual team running the strategy. The two are inextricably linked through veins of culture that run through an organisation. We look for a culture of stewardship, investment focus, and ethics, as well as a commitment to doing the right thing. We take this very seriously, as over the long-term, the people in charge may change but it’s important that a top-quality ethos prevails. When we look at the team in charge, we broadly look for the quality and relevance of experience and qualifications. We focus on the managers of the fund and how they make decisions, whether alone or together, and how long and with what success they’ve been doing so. We also look at the supporting team and how they integrate and drive the offering forward. We’re really looking for stable, experienced, and well-resourced teams that have the right long-term incentives and alignment to get the best results.


What (are we getting)?
It’s crucial to know exactly what we’re getting from what we buy, in all spheres of life. The best way to do this is to get under the bonnet of these vehicles to really understand what drives them forward and how they perform in different conditions. We are looking for funds with repeatable, reliable, and consistent ways of choosing investments. Of course, for passive strategies, where funds track specific markets, this is not applicable as the investments are bought according to rules that are pre-determined. So, in this case, we’re looking at what these rules are and how the manager achieves the matching. This is one of the reasons why passive funds used for our Original Plans are cheaper than their active counterparts used in our Ethical Plans. For funds in our Ethical Plans, it is important to note that the way the fund chooses investments is reflected in what the fund owns, and we pay close attention to what the managers are buying and selling on a continuous basis to see if it fits with what they convey in meetings. We also closely monitor the ethical and sustainability standings of these funds through provider ratings and our own in-house monitoring systems.


Where (is the value)?
One of, if not, the most important factors in driving long-term performance is cost, whether you choose an active Ethical Plan or a passive Original Plan. Here we take a close look at costs and the fund’s history of performance in different market conditions as it can give useful insights. This said, we’re aware that past performance is not a reliable indicator of future results and focus instead on a forward-looking assessment of each investment’s prospects. We want to make sure that the performance makes sense in different market environments and seek funds that do well when markets do well but do better than when Mr Market decides to fall out of bed. With funds in our Original Plans, this is more about absolute and relative cost. In our Ethical Plans we’re looking for the best value through the lens of past outperformance patterns.


To sum up
How do we tie this together? Once again, we apply a number rating system to each pillar and form a holistic view by starting with the ‘Why?’. The human touch should never be underrated, as we need to find funds that work together and have the best chance of success over the long-term. We also remain vigilant to any changes within the four Ws, as these can change a fund’s long-term prospects. We’re in constant communication with managers to make sure we are on top of any changes, for example, to who oversees the fund. All this is driven through daily collaboration and continuous monitoring of what options are available. Our mission is to find the highest quality investments for your future.

[1] Data source: Morningstar Direct

[2] Data Source: Bloomberg

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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