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Multi-manager funds are popular with investors for obvious reasons, but advisers should only use them if they are not very confident dealing with investments, says Ann Watcyn Pugh, managing director of Chelsea Investments.

“Multi-manager funds are designed for the less experienced or knowledgeable IFA,” says Ms Watcyn Pugh. “Having an umbrella company like Cofunds cuts down on the admin, where various investments are consolidated, but a multi-manager fund is a step too far.”

She feels a good adviser should be able to manage a client’s portfolio themselves. “We help our clients to create a portfolio of funds and then review the portfolio annually and make adjustments where necessary or desired. As long as you take the time to match the risk profile accurately at the start, then an annual review usually proves adequate,” she says.

However, Philippa Gee, investments director at Wolverhampton-based Torquil Clark, believes multi-manager funds can be useful for certain clients.

“For the smaller client who wants to avoid the need for regular reviews and requires a simple solution, multi-manager funds can be ideal. They even have a part to play for more sophisticated clients, where they can form a core holding, onto which additional, satellite funds can be held. The responsibility still lies with the IFA in terms of fund selection and monitoring, if they value their clients' business,” she says.

Roy McLoughlin, an independent financial adviser at London-based Master Adviser, agrees.

“Multi-manager funds definitely have their uses, although not at the expense of ignoring individual funds where appropriate. If an asset allocation process is undertaken correctly you will find multi-managers are often the recommended funds. Where I would question this is if a multi-manager was the only investment used over a period of time, especially if regular reviews are being undertaken,” he says.

But the funds can be a double-edged sword, says Adrian Shandley at the Southport office of Premier Wealth Management.

“On the one hand they enable IFAs to invest clients’ capital in the safe knowledge it is being actively managed. Multi-manager funds generally give more frequent assessment and review of client money, as client portfolios are normally reviewed on a periodic basis, such as quarterly, biannually and annually. It is important to invest in multi-manager funds that do not invest in their own fund management groups. For a fund manager to buy units in a fund of his own investment house is not a problem when times are good, but there is a lot of pressure not to sell units when times are bad. This is not a desirable situation,” he says.

Choosing the right multi-manager fund for a client takes time and skill, says Andrew Elson, a chartered financial planner at the Leeds office of IFA firm Bates Investment Services.

“It is very difficult to compare like with like as these funds offer such different asset allocations. You have to look at which funds are low risk, which are medium and which are high risk,” he says.

But once the right fund is chosen, it can substantially reduce the workload for IFAs, says Elson.

“We do not have to review lots of funds, just the one multi-manager. If the manager offers 20 funds then this is 20 times less work,” he says.

But if advisers provide clients with less service then they should receive less payment, says Elson.

“If a client’s money is in a multi-manager fund then I do not expect to take the same level of remuneration as if I was investing this money in individual funds,” he says.

Abigail Montrose is a freelance journalist