Multi-manager is an umbrella term for a fund that invests either in the funds of other fund managers (a ‘fund of funds’) or in third party mandates (‘a manager of managers’).
Cedric Bucher, head of business development of Architas, states: “It (multi-manager) is therefore different from a traditional fund that invests directly in individual securities (stocks, shares, bonds, etc).
“This type of fund was conceived to make it easier for investors to diversify their investments without the need to invest in a number of different funds or individual securities themselves.”
No asset class, fund or manager can outperform in all conditions, Rob Burdett, co-head of multi-manager at F&C Investments, warned. This means investing in one single-manager fund is unlikely to be the most appropriate strategy over the long-term, he added.
Most portfolios obviously therefore involve a number of different single-managers to gain exposure to different markets and strategies. Mr Burdett says multi-manager can be used to achieve an allocation to a particular area in one investment.
“Multi-manager funds aim to provide a potential solution by blending individual funds together in a well diversified portfolio with the aim of generating long-term consistent out-performance.
“Furthermore, a more consistent level of outperformance will be especially useful to an IFA as it minimises the impact of the exact timing of a new client investing, and the client will benefit more from compound interest with a consistent performer.”
Graham Duce, co-head of multi-manager funds of Aberdeen Asset Management, notes that manager of manager funds access investments via segregated accounts, more akin to the institutional market, which while sometimes allowing for lower fees can reduce flexibility as it can take longer to enter and exit from positions as seed capital is often required.
Bill McQuaker, head of multi-asset at Henderson Global Investors, said there were also fettered multi-manager funds.
These are multi-manager funds that only use funds or fund managers from a single asset management group, whereas unfettered multi-manager funds can invest in funds from lots of different asset managers.
