Spot the difference from multi-manager

In practice this means multi-asset funds will typically have exposure to a wider range of more disparate asset classes - and are far less constrained in how they gain that exposure.

Multi-manager funds will have no direct investments i.e. they will not invest in individual equities or bonds for example, but instead invest solely in a blend of unitised investment vehicles, Mark Wright, fund manager at Seneca Investment Managers, points out.

In contrast, Mr Wright says multi-asset funds are less restricted and are able to invest directly in individual equities, bonds and the like.

Juliet Schooling Latter, head of research at Chelsea Financial Services, says despite this difference multi-asset and multi-manager can be one and the same thing, or even hybrids.

Craig Nowrie, multi-asset client portfolio manager of Threadneedle Investments, says multi-asset has encroached into multi-manager because a number of multi-asset managers are selecting external managers to gain access to assets they do not manage internally, such as commodities or property.

Mr Nowrie says multi-asset managers may also access funds to gain a certain exposure, for example internally they may have value-orientated funds but they want access to growth funds.

He says there are many multi-asset funds that invest solely in their own funds, or pick individual securities given the increased risk control this offers (such as a full ‘look through’) and a deeper understanding of how an individual strategy fits into an overall portfolio.

James Priday, director of Strawberry Invest, says he finds that multi-asset funds are usually managed by a small number of fund managers within the same investment house. For example, Mr Priday says one fixed interest fund manager and one equity fund manager may get together and jointly manage a multi-asset fund.

He says they would decide on the parameters of the fixed interest, equity and cash exposure of their multi-asset fund. They would typically focus on direct holdings of government bonds, corporate bonds and UK equities, he adds.

Mr Priday says a multi-manager fund is different in that the over-arching fund manager mandates investment responsibility to other individual fund managers, both within his investment house and at other investment houses.

He says: “This approach allows the over-arching fund manager to gain exposure to specialists and high-performing fund managers. An investor gains exposure to a number of different fund managers through one holding.”

David Jane, manager of multi-asset funds at Miton, argues there is no real difference between multi-asset and multi-manager.

He says multi-asset investing describes an investment approach whereby a manager can invest across a range of assets as described above. A multi-manager fund is one way of implementing a multi-asset approach, Mr Jane adds.

He says: “That is to say the manager will invest in collective investment vehicles to deliver the desired multi-asset approach.

“The alternative is for a multi-asset manager to invest directly into asset classes or to adopt a mixture of the two approaches above. There is also the option of taking a passive approach.”