Credit Suisse’s attempt to differentiate its multi-manager range by offering regional portfolios appears to have backfired after IFAs failed to buy into the concept.
The group is set to merge the European, North American and Japanese portfolios into its international fund while the Asia Pacific fund will be rolled into its emerging markets vehicle.
Co-head of multi-manager Graham Duce says poor take-up of the funds shows that advisers seem to prefer fund managers to make the geographic asset allocation calls. The four regional funds have attracted only £75m since launch in August 2001.
Duce and co-head Aidan Kearney, who officially took over the funds in April, also want to shape the range to better suit their styles. Duce says: “We saw opportunities to make improvement for investors. Now we have our feet under the table, Aidan, myself and the team want to make the funds our own.”
Duce says the international fund will now have £60m in assets spread across 20 underlying funds while the emerging markets portfolio will hold about £20m in 15 underlying portfolios.
He says: “We felt that while the European, North American and Japanese portfolios could be merged into international, the Asia Pacific market has enough scope to warrant being placed in the emerging markets fund, an area where opportunities are growing rapidly.”
Chelsea Financial Services managing director Darius McDermott says: “It is the right decision to move away from the regional strategy and shows that the group is willing to be proactive over its fund range. Most advisers would have felt that these proposals would have been in the pipeline as those funds simply have not gathered the attention that the group had originally hoped.”
Investment Management Association figures show the Asia Pacific and Japanese portfolios have delivered fourth-quartile returns over the past three years. But what really reflects the lack of interest in geographic funds is that despite the European and North American portfolios sitting in the first and second quartiles respectively, they have pulled in only £55m between them.
Hargreaves Lansdown senior investment adviser Ben Yearsley says: “Aside from the whole question of demand for the product, CSAM has also seen its sales and marketing fall apart in recent times, having lost a host of senior members of the team. That makes a big difference as these guys are not going out talking to IFAs and offering these products to them. You then have to throw in the fact that nobody is buying the US at the moment as it is such poor value.”
Credit Suisse will also be looking over its shoulder at Thames River Capital, which poached multi-manager duo Gary Potter and Robert Burdett in February. Thames River is mobilising its sales and marketing arms to launch a massive asset gathering campaign on their arrival later this month.
Bestinvest senior investment adviser Hugo Shaw says: “On the one hand, Credit Suisse wants economies of scale and this provides it, without diluting access to certain geographical asset allocation calls. However, it has been well documented that CSAM has struggled as an asset manager and with the former multi-manager duo set to launch at Thames River, the question some investors will be asking is why should we stay with the old offering if the previous managers are starting off somewhere new?”
McDermott says: “I would doubt it was on that basis as the multi-manager team at CSAM are talented enough not to have to worry about what is going on at other firms. Funds of funds just have to be careful about having vehicles that justify some of the double charging that is going on.”
CSAM is also relaunching the £15m global bond fund as a multi-asset diversified vehicle that will put to use Duce and colleague Rob Bowie’s experience of running such funds during their time on the private banking side of the business.
The fund will give access to a range of assets by investing across what Duce calls “the three silos” of core, satellite and plus. The fund will look to return a 5 per cent annual yield by investing in around 20 underlying vehicles, with exposure across equities, bonds, property and more alternative products such as hedge funds and commodities.
Duce says: “The launch was logical considering the amount of experience Rob Bowie and myself have on the multi-asset side of the business. The vehicle has complete flexibility on asset parameters, with the private banking version’s biggest holdings being 8 per cent in BMP European and American income, which are closed-ended vehicles that make use of covered call options.”
AWD Chase De Vere investment manager Anna Bowes says: “The multi-asset diversified fund was not unexpected as it is Graham Duce’s niche. They are also growing in popularity across the market and I would be surprised if more multi-managers do not follow suit, if they are not already.”
Following the departure of Burdett and Potter, Duce and Kearney have two big pairs of shoes to fill on what is one of the biggest multi-manager ranges in the market. Personalising the range to their own styles should give them more time to show investors what they can do. But with multi-manager as competitive as it has ever been, there will be pressure on them to produce results.