The suite of WAY Trusts was first created in 2002 to assist investors with surplus reserve assets to protect some of those assets within a separate legal framework that keeps those assets safe for future family emergencies (or non-emergencies) as well as retaining them outside the investor’s taxable estate in order that they may be excluded from future Inheritance Tax issues.

They have been created with and by a leading tax counsel, with very specific aims and construction, both of which align with the requirements of the Trustee Act 2000 which emphasises the primary investment benefits most sought after by such investors.

The trust wording and the specified investment media, imply that the main aims of both the investor and the Act are fully taken into account:

The WAY Trusts only permit collective investments or their equivalent to be held.  These represent the most suitable investment medium for most investors, accepted by virtually all specialists and consultants in the investment sector.  In every case WAY Trustees Limited only permit income shares/units of widely-spread collective funds to be held so that there is a clear demarcation between income and capital growth within our interest-in-possession trusts where all net income (if any) is distributed to the life tenants.

There are generally one of three styles of portfolio selected by Settlors into the WAY Trusts (the investors gifting some of their surplus funds into such trusts):

1. Individual portfolios of such collective funds, selected and managed by the Settlor’s chosen Financial Adviser. Such portfolios will be unrestricted as to fund house, manager, strategy and so forth, but will then be managed by the adviser on an ongoing basis to ensure they remain fit for purpose.
2. Investment in one or more of the WAY Portfolio funds sponsored and managed by Brompton Asset  Management. These funds are described elsewhere on the site but in essence each fund represents an effective (permanent if required) risk-graded portfolio comprising leading funds and managers across the market. They are designed specifically for trust investment.
3. A collection or chosen portfolio of index tracking funds, each designed to mimic the performance of the share indices they attempt to replicate – either by replicating holdings in actual shares or by means of investment in futures and options.

Other styles of portfolio are also permitted but the three, listed above, tend to represent the main practical options for most discerning investors.

The Trustee Act 2000 describes the kind or requirements that might make investments suitable for trusts and which focus on the following issues:

Diversification

This is generally achieved by Financial Adviser introduced Settlors because they choose to appoint those advisors to advise and ‘manage’ unrestricted portfolios of such vehicles.

Investment in the WAY Funds achieves significant diversification because the extremely experienced managers at Brompton Asset Management run the funds as ‘portfolio’ funds encompassing many of the most successful fund managers and sectors, acting on a collective basis as well-spread portfolios.  Any active management within the WAY Funds is highly tax-efficient because such funds are exempt from Capital Gains Tax on internal trading.

As regards Index-tracking funds, tracking one or more major indices, these by definition are well-diversified – across 100 shares if tracking the FTSE 100, and so forth across all major indices (UK, US, Europe and even Asian).  Our team is capable of agreeing suitable weightings of such index-trackers to ensure there is no inappropriate concentration/lack of diversification.

Active Management

If active management is necessary or thought to be beneficial then this is met with all three of the above strategies.  Managed portfolios are clearly active in nature.  The WAY Funds are all actively managed with relatively high underlying fund turnover which helps in achieving solid sector performance. Index-trackers encompass active management by virtue of the shuffling of shares in and out of each relevant index as their performance waxes and wanes – if the share price of a constituent falls significantly, it exits the index and avoids further losses.

Attitude to Risk

This is an interesting question, bearing in mind the potentially conflicting interests between Settlor and Beneficiaries – the Settlor wishes to keep the assets safe in case reversions are necessary, the Beneficiaries may well wish for substantial longer term capital growth requiring greater volatility and sector risks.  WAY Trustees Limited has always erred on the side of the Settlors wishes and will continue to do so.  As regards Settlors’ attitude to risk, the WAY team translates such wishes into approving their chosen appropriate portfolios (which have been requested by the Settlors in any case within the application paperwork).  However, our regular request to both our internal and external oversight specialists will include all such portfolio details with any specific requests regarding attitude to risk.

Compliance with the Trustee Act 2000

WAY Trustees Limited’s compliance with all of the requirements of the Trustee Act 2000, as regards investment and investment advice, is met by Settlors choosing from the above routes to portfolio construction and maintenance, so long as it is properly documented as the Settlors wishes.

Furthermore, we also believe that WAY Trustees Limited, seeking and receiving generic advice from independent investment professionals, covering both index-tracking and WAY Fund investment, if received on at least an annual basis, also complies with the Act as regards ongoing portfolio oversight.