InvestmentsOct 23 2018

Can the multi-manager fund survive?

  • Gain an understand of multi-manager funds
  • Learn about how investment professionals use them
  • Understand how the market is changing
  • Gain an understand of multi-manager funds
  • Learn about how investment professionals use them
  • Understand how the market is changing
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Can the multi-manager fund survive?

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

 

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