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New Star challenges Fof misconceptions

New Star has launched a Mythbuster campaign on its website aimed at dispelling the misconceptions it believes are putting some IFAs off multi-manager funds.

Recent NMG research commissioned by New Star shows that concerns about average performance, complexity and higher management fees are the main reasons that some IFAs are steering clear of multi-manager funds.

To dispel the myth of average performance, New Star points to the past performance of its multi-manager fund range and says there are other good multi-managers whose performance records should dispel negative perceptions of the sector.

It says funds of funds provide benefits such as active management, diversification of risk, tax advantages and the potential for discounts on the underlying funds which simplify rather than complicate the investments.

New Star also takes issue with the complaint that funds of funds are not worth the additional charges. It says the potential for outperformance outweighs the extra charges, which pay for active asset allocation, fund selection and monitoring, and argues that there is no point paying lower charges for a fund which does not perform as well as a fund of funds.

PR manager Ben Robinson says: “Some IFAs think that as a result of a well diversified portfolio, funds of funds deliver average performance. They also see funds of funds as too complex. We wholeheartedly disagree.

“The final stumbling block is the additional charges. We think it is worth paying an extra 1 per cent if you are getting an extra 20 per cent return. For that extra 1 per cent, investors are also getting the advantage of consolidation of statements and access to funds, often at a discount, that are otherwise off limits to investors.”

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