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Stay cool if stars depart, says Defaqto

‘IFAs under less pressure than in conventional funds’

The departure of multi-managers, such as Gary Potter and Robert Burdett from Credit Suisse, should pose less of a problem for IFAs than the loss of a lead manager from a conventional fund, claims research company Defaqto.

It says when the lead manager of a conventional fund leaves, the portfolio is usually handed over to another manager with immediate effect and the underlying assets could change dramatically over a short period. The means advisers will be under pressure to make a swift decision whether to hold or sell the fund.

In contrast, it says the departure of a lead multi-manager should give advisers time to reflect before making a decision because decisions about underlying investments are unlikely to be made as quickly.

Defaqto also warns advisers to think before following multi-managers to their new employers as their investment style may not be suited to a new location, support staff, administration systems and investment restrictions.

It also points out that the weight of money is important to a multi-manager as it gives them greater buying power and enables them to drive down costs when selecting the underlying investments. If the multi-manager is starting from scratch, it can mean the initial costs will be higher.

Head of investment Fraser Donaldson says: “If a multi-manager leaves, I do not think there is quite the same pressure on advisers to make a decision because there are not that many decisions to make quickly. The asset allocation rarely changes that much and the underlying managers will still be there, so an IFA can reflect a bit.

“But they will have to make a decision eventually as the new manager may decide to put a different spin on the portfolio over time.”


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