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The death of multi-manager funds?

I know I have always said that the world of advising clients on their investments is changing, but over twenty years this statement is getting a little tired.

So I would like to take this opportunity to say that, finally, we are approaching the time when this has never been more true (indeed we are already seeing the signs) and then I will never mention it again!

The retail distribution review is just over a year away and as a result the focus on charges and transparency gets sharper each day. Now I used to be a fan of multi-manager funds for the right clients, but the developments of charges, failure to outperform by many and the increasing range of passive alternatives marks, for me, the final nail in the coffin for all but a few, and I do mean literally a few, multi-manager offerings. You could chop most of my fingers off and I would still have enough fingers left to count the worthy contenders. (blog continues below)

Now, having a “me too” multi-manager product could be very damaging for many investment firms. Clients and advisers are much more focused on the total charge of a fund and if you are looking at a TER of 2% or over, there has to be a compelling reason – and by compelling, I do not just mean the “diversified” argument. For IFAs there is a great opportunity to revisit those clients who are in many of these funds and consider a fresh approach.

I am not saying the world has to be completely passive,  personally I am a fan of a blended approach, but even with active funds you can be clever with the charges and access them much more cheaply than before. Multi-managers have, I believe, had their day.

Philippa Gee is managing director of Philippa Gee Wealth Management

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. but can’t i just put clients in multi manager and take the commission?

  2. Blended is something I might just consider recommending to someone who insists on putting additives in their whisky…….as for investment of capital – tosh.

  3. I think it depends on what level you say multi-manager funds have not outperformed markets generally. I mean HSBC designed World Selection to “smooth” performance and have fewer down days when markets are falling, and in a similar sense AXA Architas aim to protect share price falls when markets are falling, and both are multi-manager and therefore expensive (TER generally 2%). However for some clients they wish to have smoother performance less down days than direct market performance. And data shows with these funds that they do go down less when markets fall and therefore provide “smoother” performance with no input from the Retail Client. I think it would be wrong to write them off because they are “expensive” when for many retail clients they are more suitable than passive funds

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