Past performance is not a guide to the future. The value of investments can fall as well as rise. The views expressed in this article are those of the author and do not necessarily represent the views of Standard Life. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of this content.
Why multi-manager?
From a very quiet start in the 1980s, the multi-manager industry has grown rapidly in the recent past, both in terms of assets under management and in terms of new entrants to the market. Multi-manager now represents one of the fastest growing sectors in the global fund management industry – research from Cerulli Associates shows that assets in multi-manager products globally have grown by 16%pa over the last four years compared to growth of just 5% p.a. in all mutual fund assets*.
*Source: Cerulli Associates, Global Multi-Manager Report 2005.
In addition, the product spectrum has widened significantly from in-house (fettered) funds to third party funds, manager of manager mandates, and most recently funds of hedge funds. Within each of these structures, the opportunity set is also widening with multi-asset, high-alpha and specialist multi-manager funds now available.
But why has multi-manager seen such an explosion? For investors, it provides a solution to the problem of having too much fund choice and not knowing where best to invest, as well as the issue of ongoing monitoring of their portfolio to check that their original fund selection remains a valid choice. In one portfolio, investors can gain suitable diversification at asset class and manager level, active management, portfolio construction and regular monitoring.
From an adviser's perspective, with over 2,000 investment funds in the mutual fund market alone, researching and selecting funds is no easy task – the likes of Standard and Poor's and Forsyth-OBSR employ teams of full-time fund analysts simply to rate funds. Multi-managers don’t just rate funds they also understand how funds work together, how they will perform in different market conditions and how to blend funds to create specific overall portfolio characteristics. These have become increasingly specialist tasks which many advisers are happy to outsource to multi-managers.
It should come as no surprise that the increasing adoption of multi-manager from the advisory community has come at the same time that many firms have looked to restructure their businesses. The headwinds of reducing commissions, regulatory burdens and general consumer apathy on financial issues have meant that many firms have focused on developing long-term relationships with fewer but more profitable clients and concentrating on areas that clients really value; namely the overall advice and relationship. More and more advisers have decided that using a multi-manager approach allows them to provide a compelling and efficient investment solution giving them more time to focus on client relationships and their business.
Multi-manager offers a compelling investment solution to advisers and investors alike. Having teams of specialist fund analysts searching out not only the best opportunities but also the best investment manager and combination of opportunities is a powerful proposition.
Links to other newsletter stories
Help with IHT planning: Part 1
Help with IHT planning: Part 2
Strength in depth in UK Equities
• What funds where?
• Past performance summaries
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