The ability to essentially get the ‘best ideas’ into one fund are what makes the asset class so appealing to many investors. But as with most investment related things, not all multi-manager funds, or even multi-asset funds, are the same and can be compared on an equal footing.
This is highlighted by the fact that of the four main IMA sectors that house multi-manager funds – Mixed Investment 0-35% Shares, Mixed Investment 20-60% Shares, Mixed Investment 40-85% Shares and Flexible Investment – the one that produced the best sector average in the past 12 months is the Mixed Investment 40-85% Shares with a return of 3.59 per cent to May 29.
Yet if you compare all the funds in these four sectors and rank them by one year performance, the data from FE Analytics shows that just three of the 10 best-performing funds sit in this sector.
Instead half of the 10 best-performing funds hail from the Flexible Investment sector, which as a whole only produced a one-year average return of 2.52 per cent.
It clearly demonstrates that investors need to look beyond just headline figures and into what the funds themselves are investing in. With an increasing focus on client outcomes and attitudes to risk, it is no longer simply a case of picking the top fund from the Mixed Investment 20-60% Shares sector (formerly the Cautious Managed sector) and hoping for the best.
So what has driven performance in these sectors? The best-performing fund for the 12 months to May 29 is the £37.6m TB Wise Income fund, managed by Tony Yarrow, with a return of 17.16 per cent. It sits in the Flexible Investment sector and has a fairly concentrated portfolio of 30-40 holdings with a focus on high-quality assets in out of favour areas.
Interestingly the top-10 performing funds in the past year include two focused on Europe, two with a specific global mandate in the title and two balanced options, which suggests returns are less likely to be the result of a specific geographical or investment bias, and instead are more likely to be a consequence of manager selection.
Meanwhile, at the opposite end of the spectrum, the bottom 10 funds in the past 12 months are almost entirely to be found in the Flexible Investment sector, which suggests that while flexibility is useful, managers still need to be making the right calls.
Topping the list is the $455.2m (£271.7m) Pimco Emerging Multi-Asset fund, which reaches its three-year anniversary later this month, but has clearly suffered in the emerging market sell-off.
Managed by Curtis Mewbourne, Michael Gomez and Masha Gordon, the fund recorded a loss of 11.1 per cent for the 12 months, with its largest weighting in emerging market equities at approximately 61 per cent of the portfolio.
Macro factors have clearly had some impact on the performance of these funds, in spite of being multi-manager or multi-asset offerings, with three of the worst -performing funds all focusing on emerging markets.
Gary Potter, co-head of multi-manager at F&C Investments, notes: “We still think equities represent the better value, but within equities you have to be pretty nimble and be careful you don’t over expose yourself to areas of the market that might have or still be on the receiving end of some rotation.