From Adviser Guide: Multi-Manager
Q: What is multi-manager?
Multi-manager is a style of portfolio through which an investor can invest in a variety of underlying funds selected and packaged by a provider.
Caspar Rock, chief investment officer of Architas, said these portfolios are designed to be a one-stop investment solution – their objective is to address asset allocation decisions while picking the industry’s best funds.
By delegating the fund selection to a specialist, Mr Rock said a financial advisory business can focus on key areas of their client relations, including assessing risk and suitability, as well as spending more time with their clients.
Mr Rock said multi-managers combine funds to meet a specific investment objective and risk profile, with the aim of offering investors, regardless of their risk appetite, exposure to a diversified range of assets, skills and strategies in a cost effective manner.
Multi-manager is a generic term which refers to a portfolio which invests in funds rather than the underlying shares, bonds or other securities.
It can refer to either a fund of funds or a manager of managers.
A fund of funds invests in a range of funds managed by different fund managers, whereas a manager of managers would allocate specific mandates to different external managers to manage of their behalf.
Although single sector multi-manager funds are available, typically a multi-manager fund would invest in a wide range of funds and asset classes to generate returns and provide diversification across asset classes and sectors.
There are a number of benefits to a multi-manager approach:
Diversification – a multi-manager portfolio would typically be able to invest in a wide range of asset classes and sectors to blend together a diversified portfolio.
Specialist managers – no fund manager is an expert in every asset class and geography. A multi-manager can access underlying funds from a number of specialist managers,this is particularly important for specialist areas such as commodities, emerging markets, financials or healthcare for example.
Active management and monitoring of risk – the portfolio managers would regularly review the underlying holdings and fund managers and have the option to switch out of an underlying fund if the fund’s investment process or manager changed and /orit was felt that performance was an issue.
The portfolio managers would also ensure that the ‘blend’ of funds retained the appropriate risk level for the portfolio at all times.