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Core and satellite for Omnis

New multi-manager company Omnis Investments believes its core and satellite investment strategy is the answer to the potential problem of high charges on funds of funds.

It has capped the charges on its three risk-graded multi-asset funds at 2.25 per cent but says this will not limit its fund selection to cheap funds.

It will make savings by investing in exchange traded funds and other tracker funds in areas where it believes that active fund managers cannot add value beyond market- driven returns.

Multi-managers are often credited with being able to reduce the charges on underlying funds through purchasing power but Omnis says this is not necessarily the case as top-quality managers that are recognised by the market for consistent outperformance are under no pressure to accept discounted fees from multi-managers.

It says the UK stockmarket is highly efficient, so managers in this area struggle to produce outperformance. It believes it is better to pay managers for producing alpha outside core markets in areas such as small and mid caps, which are less researched.

Director of multi-manager funds Lothar Mentel says: “We are adopting a concept called core and satellite, which is about trying to pay less for the market returns so you have more money for the higher cost managers. We are not necessarily going to spend a lot less; it just increases the probability of hitting that performance.”

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