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Fof sales hit £6.7bn

The UK&#39s multi-manager and fund of funds market grew by £6.7bn last year, bringing the total funds invested in the product to £20bn, according to Cer-ulli Associates.

At the end of 2001, total funds in multi-manager and fund of funds stood at £14.5bn, falling to £13.3bn in 2002 before last year&#39s dramatic increase.

The compound annual growth rate in the UK across the sector was 18 per cent over the three years to 2003 and 53 per cent in 2003 alone.

The world market for multi-manager funds grew by 28 per cent in 2003, with total funds under management reaching £378bn. The research excludes funds of hedge funds.

Globally, the funds ach-ieved a compound annual growth rate over four years of 14 per cent compared with an average of 3 per cent for all mutual funds globally.

Cerulli says it expects this growth rate to be maintained until 2008.

The five dominant global players are Russell, SEI Investments, Vanguard, National Australia Bank&#39s MLC and Northern Trust although the research notes that market share is dropping for all five companies, partly due to the emergence of new market entrants in the UK.

Cerulli argues that the products are not a fad but will benefit from the increasing global trend for consumers to seek advice on their investments.

Director Shiv Taneja says: “The UK is one of the most interesting markets. We are seeing the development of new start-ups so it is not just the big global five.”

“We have seen a lot of product innovation with the creation of segregated portfolios, the best example of which is the Merrill Lynch global select programme which gives the structure of a fund but the benefits of multi-manager.

“But Fofs are also becoming more sophisticated and many are losing their reputation for double-charging and are bringing the price down for investors.”

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