Multi-manager funds can buy funds typically only available to institutional investors, due to the minimum level of investment required. Institutional funds tend to have lower charges than retail funds, in Mr Burdett’s opinion, making multi-manager funds more affordable.
He says: “We have significant investments in funds that are not available to advisers otherwise, funds that perform well and have lower costs than the typical retail fund.”
Mr Morgan believes using some passive investment products and investing directly in some equities is a way to keep the costs associated with a multi-manager strategy lower.
Justin Oliver, deputy chief investment officer at Canaccord Genuity, says he believes the extra value added by asset allocation and fund selection justifies the extra costs.
He says: “Identifying funds that are less well known is a key part of what a multi-manager fund should offer. And being able to invest in the winners of tomorrow should be part of that.”
Cameron Falconer, multi-manager analyst at Aviva investors says the advantage to advisers of using a multi-manager strategy is that it saves time and resources that would otherwise be deployed in fund selection and asset allocation, instead enabling the adviser to concentrate on other areas of client need and of business growth.
This is a standard argument in favour of outsourcing investment management; Mr Falconer added that multi-manager fund managers are able to constantly meet with and monitor the performance of the underlying fund managers.
James Davies, investment manager of the Close Managed Funds range says that fund houses are quite willing to negotiate lower fees for clients with larger pots of assets, but such negotiations tend only to happen when a sufficient scale of assets has already been reached.
One way some multi-manager funds can get lower fees, and also potentially, more control over the way the assets are managed is via segregated mandates, where a new fund is created just for the assets of the multi-manager.
John Moore, senior investment manager at Brewin Dolphin says there are also potential tax advantages to holding assets via a multi-manager fund, as individual investments can be sold from within the fund without incurring a capital gains tax liability on any profit made from the investment, because the actual fund of funds is not being sold.
He added that multi-manager funds have the capability to invest in relatively illiquid asset classes, but still provide the end investor with the daily liquidity of an open-ended fund, allowing for a greater level of diversification than might otherwise be the case.
Mr Burdett said this allows for investments into “more sophisticated” investment products than might be the case in a portfolio typically, due to this ability to invest in less liquid assets.
