What is meant by a multi-manager Fund?
Multi-Manager Funds in their simplest form are Funds that invest in other Funds instead of individual Stocks and Shares. Professional managers hand pick a variety of Funds that they believe are the 'best in market'. Their aim is to select strategies from leading managers across the Fund management industry on the basis of their assessment of the Fund Manager’s ability to do well in the prevailing investment environment. They would also bear in mind how each Fund would complement each other within the portfolio of Funds.
These types of Funds are designed to make an investor’s life easier by bringing together a range of specialist managers into a single Fund.
There are two types of Multi-Manager Funds: those that invest in a range of other Funds controlled by different asset managers, which are called Funds of Funds (FoF), and those which appoint external managers with specific expertise to invest separate tranches of the provider's portfolio; these are called Manager of Managers (MoM) Funds. In the market today there are only a small number of true MoM Fund offerings available to UK investors, and a large and ever growing number of FoF offerings.
The aim of these Funds is to add an extra layer of diversification either through holding Funds that have already gone through a process of diversification themselves, or by segmenting a portfolio and outsourcing its management to individuals who have been identified as having proven experience in a particular area.
Some investment houses are becoming well known for their choice of Multi-Manager Funds, for example, Jupiter’s Merlin range offers a variety of portfolios from more cautious blends of equity and fixed income Funds through to diversified blends of global equity Funds.
What to look out for...
Investors need to look beyond the quoted Annual Management Charge to find the total annual charge, sometimes referred to as the ongoing Fund charge (OCF) that will dent their returns. On average the ongoing charge on a Multi-Manager Fund is usually higher than that of a single manager Fund. This is because, not only have you the underlying Funds charges to pay for, but also the Multi-Managers costs for piecing the portfolio together.
So, why choose a multi-manager Fund?
- Diversification – reduces your investment risk
- Time savings – relieves you of the burden of Fund selection and portfolio construction
- Simplicity – a one-stop investment solution
- Ongoing review of the Funds' holdings by a full time professional deciding when to buy and sell investments