Home >
Investment view: Advisers clash over multi-asset due diligence
Advisers have clashed over the level of due diligence they need to perform on a multi-manager or multi-asset portfolio following a massive discrepancy in returns last year.
Due diligence has proved a particular issue in the hedge fund world, where losses in absolute return funds and the Madoff debacle forced advisers to examine their chosen portfolios more carefully.
More recently, this closer scrutiny has spread to retail multi-manager portfolios.
In particular, some have questioned whether all Cautious Managed funds could truly be called cautious, as returns varied from a gain of 16.9 per cent to a loss of 25.6 per cent over the year to June 22.
Dan Farrow, an IFA at SBN Financial, said the industry needed re-educating about the meaning of risk to enable it to assess its clients' portfolios appropriately.
"Another big issue will come to the fore if the Financial Ombudsman Service receives compensation claims from clients who were in assets which we've all deemed to be low-risk, but which are down 30-40 per cent."
Andrew Fisher, chief executive of Towry Law, recommended continual due diligence to monitor progress for clients.
"In using a multi-asset manager, as a fiduciary on behalf of the client, you should have met all the managers, you should know them all, you should know what positions they are holding at any one time, every day.
"You should know which are consistent with their strategy and which have moved outside their strategy."
But Steve Wilson, an adviser at Rothmere Wilson, said advisers did not "need to go to quite that level".
"I use a couple of multi-managers who I will speak to every quarter, sometimes more frequently, to gauge their positions. I don’t feel I’m defrauding my clients by doing that."