But are there barriers to entry for younger managers and funds and at what stage will multi-managers and discretionary managers support them?
Is the current regulatory regime supportive of new funds or does due diligence mean the majority of investors will not touch a fund until it has a three-year track record or has £250m assets under management?
Mr Rock says there are both internal and regulatory restrictions that may preclude him from investing in very small funds or those without a clearly transferable or relevant track record.
“Most investors have to operate within some sort of concentration rule that does not allow them to own more than a certain percentage of a fund, so unless you have a number of like-minded buyers, you often have a classic ‘chicken and egg’ problem that gives rise to the general cry that it needs to be at least £50m in size to be considered.”
Architas recently invested in a fund that had only £6m, taking it to nearer £40m in recent weeks. The manager, Franklin Templeton, had a very strong process and track record in pan-European equities and the smaller fund was Europe ex-UK and a subset of the former, so Mr Rock was happy to back it.
Investec picks either fund management houses that engage in sensible succession planning or new boutiques, where a small but experienced team of money managers can collectively offer sound stewardship.
Rathbones’ Mr Coombs says: “We are very happy to back new funds. We think you often get the best performance in the first few years, when fund managers are totally focused on performance. You also get the benefit of lower prices because you increasingly get feeder fees.”
Rathbones recently bought into the Michinori Japan Equity fund on day one and the Prusik Asia fund in its first week. The latter soft closed before its three year anniversary.It has also invested in the Muzinich Total Return Credit fund, which is a new fund, but has a fund manager with 30 years’ experience of investing in fixed income in the US.
Investec’s Mr Summers says regulatory and industry developments have heightened risk aversion and in many instances “raised the bar” in terms of quality.
“Often a three-year track record of a particular vehicle might be absent, but the fund manager him- or herself has a longer track record that is usable. Fund liquidity is also important.”
Mr Coombs thinks the RDR and other regulation has shaken up the fund management industry from its complacency, meaning that there are fewer new launches, but that product development departments are being forced to ensure that the funds that are launched are more robust.