Charges for multi-asset and multi-manager funds

In general, he says multi-manager tends to be more expensive than a fettered fund of funds, which in turn tends to be more expensive than a multi-asset fund run by a single manager.

This is, however, a generalisation, warns Mr Rutland, adding that t is important to realise ‘value’ is a very different thing to ‘price’.

He says: “It may well be that paying a bit more for an external fund manager’s expertise in a particular area will reap rewards in the medium to long term.

“To use an analogy: you may decide it’s much cheaper in the short-term to plumb a new bathroom yourself but when the kitchen ceiling collapses, you’ll wish you paid for a qualified local plumber.”

Peter Fitzgerald, head of multi-asset retail funds at Aviva Investors, said one should expect to pay between 50 basis points and 75 basis points more a year for multi-manager funds but added this really depends on how the portfolio is structured.

Multi-asset funds tend to price in line with single strategy funds, according to Jamie Farquhar, head of sales for JP Morgan Adviser Solutions.

He says multi-funds bear the cost of the underlying vehicles and on a typical 0.75 per cent AMC share class, multi-asset funds price at about 0.95 per cent OGC (ongoing charge).

Mr Farquhar says the story on multi-manager funds is complicated by the varying costs of the selected underlying funds and OGCs can vary widely from as low as 1 per cent to more than 3 per cent.

He says: “This is further complicated by the variable use of passive exposure to help achieve a pricing policy as well as the existence of both fettered and open architecture products.”

The underlying manager costs are reflected in performance, Francis Ghiloni, director of distribution and client management at Scottish Widows Investment Partnership, says.

He points out “you get what you pay for”.

Mr Ghiloni says: “It is easy to see the effect costs are having on returns.

“While multi-manager funds sometimes have a reputation for higher fees, this isn’t always the case.

“Fund managers of a certain size are in a position to get the best terms possible and have access to share classes at the most preferable rates. The lower costs are passed on to investors.”

No matter how low the charges, if the manager is not delivering then the charge is pretty irrelevant, warns Adrian Lowcock, senior investment manager of Bristol-based Hargreaves Lansdown.

He says: “What you want is good value for money. You want to get a good fund manager, doing what they said they would and then assess what is a fair price for this.

“If there are a couple of managers in a range then you could compare on price. Price is a factor and it is important.”