There is no denying the success of fund of fund and manager of manager structures, from groups with long-standing offerings such as Jupiter, New Star, Cazenove, Fidelity and Credit Suisse, to relative newcomers such as North, Resolution and Thames River. Some groups have chosen to try a single fund formation using the same approach, such as Skandia’s best ideas funds, or there is even the example of Norwich Union outsourcing UK funds to Schroders and JP Morgan.
According to the Investment Management Association’s quarterly statistics, there were 246 funds of funds at the end of the second quarter of 2007. This compares with 232 a year ago, up from 209 in June 2005 and 190 in June 2004. IMA figures also show that the number of fettered funds of funds has remained fairly static over the same period, from 54 in June 2004 to 66 three years later, showing that the vast amount of new launches are investing in funds outside their own companies.
Over the past three years, assets headed into the sector have grown although not with necessarily the same velocity. In June 2004, the IMA reported gross sales of Fofs were £753.8m, rising to £1.6bn by the end of June 2005, £2.1bn at the end of June 2006 and £2.5bn by the end of this past quarter.
Fund of fund structures sit in every IMA sector but their most natural home seems to be in the managed sectors. Growth in these peer groups has been substantial. In the cautious managed sector, there are just 27 funds with a five-year track record to July 9, 2007 while over three months there are 92, according to Morningstar data. The balanced and active managed sectors – also common homes for funds of funds – are no different, with 72 and 48 respectively featuring five-year track records compared with 118 and 76 over three months.