SEI’s head of asset management distribution for UK and Europe Kevin Addison says the “herd mentality” of UK funds of funds could come under pressure as transparency improves following the RDR and a fee-based advice framework focuses the minds of cost-conscious investors.
He says: “When investors start looking at these funds they might be surprised how similar in composition some of them are. There is something of a herd mentality in this market.”
Addison says the “somewhat saturated” market is now at risk of plateauing, resulting in investors choosing to move away from established star managers to peers with shorter track records.
Addison favours the global manager-of-manager approach, in which mandates are awarded to fund managers and blended into portfolios offering exposure to asset classes around the world.
This creates truer diversification, he argues, giving providers more control over underlying managers and mandates.
He says: “We invest in the best managers in any given area and ensure they manage mandates in line with our requirements. We do not just invest in off-the-shelf funds.”