Just 5% of multi-manager funds make the 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.
Investment funds that invest in other investment funds from a wide range of asset managers and are often referred to as funds of funds. Some multi-manager funds only invest in the funds of the investment house providing the fund of funds and these are known as “fettered”. An “unfettered” multi-manager fund is free to invest in what the fund manager believes are the top performing funds from across different markets and industries. Investing in multi-manager funds means your risks are spread across geographical regions and industry sectors but it also adds another layer of charges and some multi-managers also levy an out-performance fee.
A financial adviser who is not tied to any financial services company (such as a bank or insurance company) and is authorised by the Financial Services Authority (FSA). They can advise on financial products to suit your circumstances. All IFAs have to give consumers the choice of paying by fees or commission and have to explain which would best suit the customer in that particular instance. Also, if commission is paid either by the client or the financial service provider recommended by the IFA, the IFA must disclose what that commission is.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.