How do multi-asset fees stack up?

This article is part of
Guide to Multi-Asset Investing

“For example, we can implement our desired asset allocation using passive investment vehicles,” she adds. “These deliver a high degree of confidence of capturing the market returns we are looking for, in a cost-effective manner.”

Mike Deverell, investment manager at Cheshire-based Equilibrium Asset Management, says it is important for advisers to focus on costs as this is the one area within their control.

“We can control risk exposure to a great extent and can influence returns,” says Mr Deverell.

“However, our focus is not purely on cost but on value for money. For example, we have plenty of exposure to passive funds, but will not hesitate to pay more for an active fund if we are convinced it can add value.”

Looking solely at what appears to be the cheapest option may not ultimately ensure the best end result for an investor. Funds can be cheap for a reason, and the same can be true for expensive ones.

That does not mean there is not sometimes room for manoeuvre, though.

“Where we buy active funds, we always make sure we negotiate on fees,” he adds.

“Because we invest in relatively large sizes, we can often achieve discounts over and above even the normal institutional share classes. This is particularly the case where we hold more than one fund with a particular manager.”

Running money internally

The preference at HSBC is to run money internally, so as to avoid high fees that can be attached to some active-managed, third-party strategies.

“This cost saving at asset allocation fulfilment level is then passed through to our clients through the OCF,” explains Ms Bliebenicht.

For Mr Salih, taking some time to examine what is out there reveals some bargains.

“Funds like Premier Diversified Growth, a multi-asset fund that invests directly in assets, is pretty cheap at 0.65 per cent OCF – cheaper than many equity funds in fact,” he says.

“Church House Tenax Absolute Return Strategies sits in the Targeted Absolute Return sector but is basically a multi-asset fund (it doesn't do any shorting) and that has an OCF of 0.77 per cent. Again, not expensive at all.”

He also highlighted Rathbone Strategic Growth Portfolio at 0.66 per cent OCF and M&G Episode Income – the property section invests in property funds, everything else is direct – at 0.8 per cent.

Going forward, however, investors might be in line for even better deals.

“Multi-manager multi-asset funds are increasingly coming under pressure to reduce their charges - some are up to 2 per cent,” says Mr Salih.

“I imagine these prices will come down eventually, especially on the larger funds where economies of scale really mean there is little reason not to pass on savings to investors.”