According to Ben Willis, head of portfolio management at Chase de Vere, this gap is significant for the future of multi-manager funds. He says: “Since the RDR, with transparency of costs and the industry becoming far more cost-conscious, [multi-manager funds] have been under pressure from both multi-asset funds and discretionary fund managers, who are generally providing a similar service but at a lower cost level.”
Multi-manager offerings are not the first mixed investment strategy to be written off. With-profits funds have been on the cusp of extinction for a number of years, according to many commentators and reports, but a newer breed has managed to remain a port of call for pension investors in particular.
The question for multi-manager approaches is whether the pendulum has simply swung too far in favour of DFMs and multi-asset managers.
Danny Knight, an investment director at Quilter, says the outlook remains challenging. “There are still plenty of established multi-manager solutions in the market that have delivered solid performances and a loyal following among their clients. But we anticipate the trend toward more sophisticated multi-asset solutions is set to continue.”
David Coombs, manager of the Rathbone Multi-asset portfolios – one range that now helps keep costs down by buying bonds and equities directly rather than funds – says the low-return environment also poses a problem as it makes higher fund charges more noticeable:
“We think this low-return world is here for the foreseeable, so the future for multi-manager funds looks tough,” Mr Coombs says.
Terminology trouble
Yet the continued rise of multi-asset does not necessarily signal the end for multi-manager.
A report by Platforum, published in December 2017, found that multi-manager assets under management had grown by 15.1 per cent a year post-RDR (2013) compared with multi-asset, which witnessed smaller growth of 9.2 per cent a year over the same period.
Since the EU referendum in 2016, the clamour for these strategies has been even greater. During that year, multi-manager funds accounted for 43.6 per cent of total net retail sales.
Despite multi-manager sales dropping to 22.1 per cent of total sales in the first three quarters of 2017, the data suggests a market in rude health. Some of this increase, however, once again comes down to terminology.
Platforum’s research also listed the top selling multi-asset and multi-manager fund managers over 12 months to October 31 2017, as Table 2 shows. The top three multi-managers – Vanguard, Old Mutual (now Quilter) and Standard Life Aberdeen – gathered three-quarters (75.4 per cent) of all net sales between them.
Table 2: Top multi-asset/multi-manager providers by net retail sales, 2016-17
Vanguard | 2,850 |
Old Mutual Global Investors | 1,910 |
Standard Life Investments | 1,870 |
Legal & General | 1,320 |
Premier Asset Management | 570 |
Fidelity | 525 |
UBS | 370 |
Architas | 260 |
Tavistock Wealth | 155 |
Hargreaves Lansdown | 130 |
Source: Platforum, based on Morningstar data. Copyright: Money Management