• To identify where and how they can work with other organisations to meet their business requirements.
• Multi-managers are clearly presenting a very compelling proposition and if so then what are the key steps IFAs need to take when embarking on this course of action.
As already mentioned above, the IFA firm needs a strategy for dealing with investment clients: do-it yourself or outsource. When outsourcing to a multi-manager provider, the adviser must fully understand their client’s attitude to risk and appetite for equity investment. Once agreed appropriate, then the selection may be made of which multi-manager best meets the client’s requirements first and foremost and the IFA’s business as well. Choice of ‘investment partner’ will be driven by the availability of the multi-manager funds on the adviser’s platform of choice - this is less of an issue as more and more fund houses tie-up their deals with the wraps and fund platforms to make themselves accessible to investors.
Just what are IFAs using when investing with multi-managers? Put simply these funds come under the IMA label of Mixed Investment. With three broad categories of varying share content, the lower this is the supposedly lower risk the fund and the 20 per cent to 60 per cent share sector continues to attract client money. This is puzzling because mixed investment 20 per cent to 60 per cent sector is the old Cautious Managed and basically a bit of a contradiction. The reality for retail investors is that if they are identified as being truly “cautious” then equity investment is not for them, but the edges have become blurred and these funds now try to be all things to all men with very “mixed” results. I stopped investing new client money into one of the flagship Cautious Managed funds because it had simply morphed into a tracker fund and ceased to have any place on my investment fund radar. The multi-manager sector offering some potential value to clients is the Mixed Investment 40 per cent to 85 per cent shares.
When researching these funds, the factors to consider (apart from the fundamental point on client risk profile) are:
• Fund objective as set out in the key investor information document: what is the thrust of the fund management?
• Costs and charges: total expense ratio is not the over-riding consideration despite the views passed down from the regulator but it should not be ignored of course. Like any other collective fund, multi-manager must offer fair value and be competitive.
• Any strong sector bias that might skew the performance of the fund, for example over-emphasis on eurozone right now or underweight in US, may not be the smartest idea.
