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Multi_Manager view

Despite the growing popularity of fund of fund investing, some advisers maintain that they are not the quick fix for asset allocation that investors may perceive them to be.

Indeed, it is anticipated that when this year draws to a close, many more multi-manager funds will have found their way into quite a number of investor portfolios.

F&C Asset Management head of group communications Jason Hollands points out that multi-manager portfolios are a key proposition for the firm during the Isa season but he notes that their appeal is typically focused in certain parts of the market.

He says: “Multi-manager funds tend to be bought essentially by those who do not wish to be part of the portfolio management process such as by either smaller advisers or financial planners.”

Bestinvest head of communications Justin Modray says he is generally not a fan of fund of funds but he still expects to see more sales this year, at least in relative terms, of multi-manager vehicles over individual open-ended funds.

Modray explains that his lack of enthusiasm is because ultimately he believes that portfolio management is the adviser’s responsibility.

Proact financial planning director John Porteous takes a similar view, saying that while he expects further growth in the multi-manager market, he too feels that the role of the financial adviser is one of asset allocation.

With regard to where the further growth is going to stem from, Porteous believes that multi-manager funds make sense for clients who do not speak to their advisers on a regular basis and for smaller firms which do not have sufficient resources and research capabilities at hand.

Modray says fund of funds can suit smaller adviser groups. He explains that from a professional indemnity point of view, they can make sense as they significantly reduce the risk of misselling.

But he asserts that he still does not necessarily think that investors should be pushed down a multi-manager route.

He says: “For those with smaller amounts to invest of, say, £10,000, the fund of fund option can make a lot of sense in terms of the diversification they can offer. But for individuals with £30,000 and upwards to invest, I do not think they are the best option.”

Hollands says many IFAs want to concentrate on giving advice on such areas as pensions and Isas so they tend to use multi-manager funds.

He adds: “Professionals want to stick to their core competencies. There is part, not all of the market, though, who want to focus on giving holistic financial planning to clients and less on portfolio management.”

Porteous agrees that there is an argument with regard to professional indemnity but he warns that when it comes to recommending fund of fund vehicles, advisers are simply delegating and not abdicating. He says: “It does not mean that nothing can go wrong. But fund of funds are pre-packaged solutions and historically they are far more transparent than other previous such solutions such as with-profits.”

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