Thorough due diligence before investing in a fund is a must and there are a number of ways to do your homework.
There are the basics – looking at the manager’s website for brochures and videos on their investment strategy and market views, and of course, fund factsheets.
A good place to start might be an examination of the manager’s background, experience and style in order to ascertain whether they have the necessary knowledge of relevant investments. The size and stability of the firm, the range and quality of their offering, their performance and support - both online, via phone and face-to-face - are also important considerations.
Cedric Bucher, head of business development of Architas, says: “In terms of investment skill, some managers have limited ability to research non-traditional asset classes (such as alternatives) and do not have the size to research and personally visit managers not domiciled in the UK.
“As the asset management industry goes global, it might be important that the manager has the ability to visit investment managers worldwide.”
Another important factor, especially given the premium you will pay for a multi-manager fund - is price. Alongside appropriate costs, the manager needs to provide an adequate service.
Mr Bucher argues: “A cheaper manager might deliver good performance but might lack in periodic reports or communication.
“In this case, the adviser could be very much in the dark and would likely feel they had lost control. A small premium might need to be paid, therefore, for the assurance of a collaborative, well-communicated relationship.”
Many of the ratings agencies also rate multi-managers - and some in fact specialise in doing so. Firms that rate multi-manager funds include Morningstar OBSR, Scopic and Raynor Spencer Mills.
However Ian Aylward, head of multi-manager research at Aviva Investors, urges caution in relying on ratings agencies.
“There is no substitute for doing one’s own research and major providers have copious information on their websites to assist investors in their assessment.”
But to really get under the skin of funds you must meet the managers in the flesh, many in the sector argue.
Meeting with the manager one to one or at an IFA seminar is the best way to get in-depth insight into the fund itself, and the manager’s investment style, according to Rob Burdett, co-head of multi-manager at F&C Investments.
