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From Adviser Guide: Multi-Manager

Q: How does multi-manager differ from fund of funds?

A multi-manager builds investment solutions where the underlying investment management is delegated in some way to a third party asset manager.

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

A fund of funds is a type of multi-manager investment product that invests into other funds, rather than directly into individual stocks, shares, bonds, etc.

A fund of funds is often referred to as a “fettered” multi-manager portfolio.

While this follows the principles of a multi-manager portfolio, which are less commonly referred to as unfettered portfolios, a fund of funds usually invests in the funds of one investment house.

For example, Gary Collins, head of UK retail sales at Threadneedle, pointed to Threadneedle’s fettered fund of funds, managed by Alex Lyle, will invest only in Threadneedle funds while the multi-manager range, managed by Damian Barry and Giles Gilbertson, will invest across the whole market.

Mr Collins said: “This fettered approach means there is less choice in underlying funds for the fund manager.

“This can be balanced if the investment house has a wide range of funds across asset classes as it can provide the benefits of a multi-manager fund but in a more cost effective solution.

“There is also the additional benefit that the fund manager overseeing the portfolio has a more detailed understanding of the underlying funds as they work alongside those fund managers. “

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