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Gartmore multi team sets out criteria for using internal funds

Gartmore’s policy of excluding internal funds from its multi-manager portfolios would be relaxed if a Gartmore fund were head and shoulders above its peers says the firm.

The multi-manager team avoids Gartmore funds to prevent potential conflicts of interest. One situation where this could happen is during a new fund launch.

Fund management groups often make new funds more attractive to investors by seeding them with internal money. Multi-managers are likely to be the first port of call and may be put under pressure to invest at the expense of a better holding outside the group.

Although Gartmore’s multi-managers have never invested in house, there are no legal bars to stop them from doing so but they are wary of potential internal pressures to delay if they decided to sell Gartmore funds due to asset allocation changes or underperformance.

There is also a concern that holding a Gartmore fund within one sector could lead to pressure to purchase more.

Gartmore Portfolio fund manager Marcus Brookes says: “We recognise that Gartmore has outstanding funds that successfully raise money from investors – they do not need our money. If I were to buy a European fund at Gartmore, people would wonder why I had not bought the Gartmore US fund. Maybe I would be under pressure to buy that and other funds.

“We do not feel the need to compromise our independence as there are so many other funds out there to choose. But if it was clear that Gartmore had a fund which was head and shoulders above everyone else, we would not cut our nose off to spite our face. We would consider investing but would need to be clear on the circumstances in which we would sell.”

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