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Active managers ‘add value’

Octopus Investments has warned it may be tougher to manage its multi-manager Omnis funds within their cost caps because irrational markets are likely to increase the need for active managers.

The Omnis multi-manager range was launched last year with a 2.25 per cent cap on the total expense ratio. The cap was made possible through a core-and-satellite approach based on the theory that a big part of the returns are generated by the market, so investing in a core of exchange-traded funds and institutional-style tracker funds will deliver returns at a lower cost than active managers. The higher costs of active managers who outperform the market can then be met within the cap as satellite holdings.

Chief investment officer Lothar Mentel says the funds held more ETFs and passive funds at launch than they will hold long-term. TERs were less than 2 per cent, but are now approaching 2.1 per cent in the advanced fund.

“At the moment, markets are irrational and we think active managers in the UK can add value.”

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