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From Adviser Guide: Multi-Manager

Q: How can I make sure the fund suits my client?

Multi-manager funds, as managed solutions, would normally sit in the IMA Managed sectors.

By Emma Ann Hughes | Published Jun 06, 2012 | comments

Gary Collins, head of UK retail sales at Threadneedle, said these sectors have recently been reclassified to provide some categorisation as to the level of risk in the fund.

This is now based on the fund’s exposure to shares, with the higher exposure to shares denoting a nominally higher risk for the portfolio.

New IMA Managed Sectors are:

* Mixed Investment 0 to 35 per cent shares

* Mixed Investments 20 to 60 per cent shares

* Mixed Investments 40 to 85 per cent shares

* Flexible Investment (no minimum or maximum requirements over equity levels)

Some multi-manager funds also use third party companies such as Distribution Technology to risk-rate their funds.

Distribution Technology risk rates clients from one to 10 and provides a specific asset allocation for each risk rating.

Multi-Managers can then take this asset allocation and use this as a guide to their own investment decisions.

When considering risk rated multi-manager portfolios from different providers, Mr Collins said it is worth considering the flexibility they are allowed from the overall Distribution Technology asset allocation.

However Mr Collins said advisers should also consider the greater the flexibility the more an asset manager can add value with their own views on markets.

For example, he said the Threadneedle Multi-Manager funds can deviate by up to 10 per cent from the Distribution Technology asset allocation but they are then subsequently risk rated again by Distribution Technology to ensure they will fit within the risk profile.

Investors complete a Distribution Technology questionnaire which aims to understand their attitude to risk (from one to 10).

He said this then enables an adviser to match an investor with an appropriately risk rated multi-manager fund.

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