There is a potential cost difference between the two approaches, but again, it is difficult to quantify, while there may also be capital gains tax considerations (CGT). All switches within a multi-asset fund are free of CGT.
There is a danger with a managed portfolio service that rebalancing and switches could trigger a capital gain. Again, this may affect the relative performance of the two types of approach for different clients.
Neither a managed portfolio service nor a multi-asset fund is necessarily structured to perform better and there are good and bad examples of each. Data providers recognise the comparison problem and FE is set to launch five new multi-asset sectors based on risk ratings to facilitate better comparison between multi-asset funds.
However, in looking at managed portfolio services versus multi-asset, the outcome for clients can be significantly different depending on the efficiency of execution, the level of fees and the tax position of the client.
Cherry Reynard is a freelance journalist
