Having it all under one umbrella

“The other benefit of a fund of funds is that an adviser does not need to asset allocate as the fund manager does that for them,” he says. “However, there has been an explosion in the number of funds of funds which means comparing them is increasingly difficult.”

The desire to lay down investment parameters has led to an increased demand for manager of manager products. Being able to dictate exactly how they want individual managers to perform allows fund houses to deliver more tailor-made options for clients.

Some groups, such as Skandia, offer a combination of manager of manager and funds of funds to their clients. According to Ryan Hughes, one of its fund managers, this hybrid structure enables investors to enjoy the benefits of both disciplines within the same portfolios.

“Many very good managers choose not to make their funds available to retail investors so the only way to get access to them is through a segregated mandate,” he says. “Our structure allows us to choose the most suitable way of getting exposure to these individuals.”

It might sound like a cop-out but the simple fact is that there is no right or wrong answer, insists Mr Yearsley at Hargreaves Lansdown. “Advisers with the time and resources to effectively research the market can easily use individual funds and this will give them access to more esoteric holdings,” he says. “One idea is to have the core of your portfolio in a fund of funds and a satellite of more specialist funds around the edge.”

Rob Griffin is a freelance journalist