Just 5% of multi-manager funds make the grade

Fail grade

Despite multi-manager funds gaining in popularity and blooming in size over the past decade, a new report has shown that only a handful have a decent long-term track record.

Funds under management by multi-managers grew 42% during 2009, and have increased by 260% over the past decade, according to the Investment Management Association.

However, financial research company Defaqto has found that only 5% of these funds have been around for 10 years, have a named fund manager and, therefore, a demonstrable track record.

There are only 85 surviving multi-manager funds that were around 10 years ago, according to Defaqto's report. Of those only 38 claim to have the same fund manager, and on closer inspection, only 22 of these have named fund managers. The rest are managed by a multi-manager team or a third party.

Since there are more than 400 multi-manager funds to choose from, this means only around 5% have managers with demonstrable track records with the same fund over 10 years.

The report reveals Threadneedle Equity & Bond, Threadneedle Global Equity and Threadneedle Global Equity & Bond as three of the top funds in terms of consistency and performance.

Jupiter Merlin Growth, Jupiter Merlin Income, Jupiter Merlin Worldwide, Margetts Providence Strategy and Margetts Venture Strategy and M&G Managed Growth also make the grade.

Fraser Donaldson, insight analyst at Defaqto, believes multi-manager investing will continue to grow in popularity.

He says the retail distribution review, which will shake up how financial advisers are remunerated, will encourage advisers to outsource some or all of their investment processes, and therefore accelerate the trend of using multi-manager funds.

Due to the large number of funds being launched, closed or merged, and a wide range of multi-manager techniques such as passive investing and investing solely in in-house funds, Defaqto has launched a free multi-manager guide. It looks at the multi-manager industry over the last 10 years, detailing which managers have stood the test of time and detailing fund information.