According to Defaqto, advisers looking to outsource their investment decision making to a multi-manager fund in the lead up to Retail Distribution Review (RDR) implementation should choose carefully, as very few of these funds have managed to perform consistently since 2008.
Defaqto's latest survey of platform users, completed in January, found that 26% currently outsource to a multi-manager, and this outsourcing trend is likely to increase further as advisers review their business models during 2012.
Defaqto's Guide to Multi-managers, published today, suggests that increasing average cash positions in multi-manager funds (up by 0.5% in 2011) indicate a sense of uncertainty and lack of confidence in the market due to the fragility of the global economy. In addition, Defaqto's QuantRater, which assigns ratings to funds from 1 to 5 based on their consistency and performance, shows the difficulties facing the market. Of the 184 multi-manager funds rated, only 25 managed to maintain a rating of 3, 4 or 5 since June 2008. This suggests that consistency in fund management is extremely difficult to achieve.
Multi-manager teams are trying to ensure that these funds remain a real choice for advisers looking to outsource some or all of their investment process, and the challenge for advisers is being able to pick those funds that are the most consistent, and are likely to remain so - and that ultimately will best meet the needs of their clients.
Defaqto's guide provides in-depth fund data to support advisers in selecting appropriate multi-manager funds for their clients.
This guide highlights a number of key areas that advisers should consider, including:
Changes in the market over the last six months
An analysis of multi-manager fund consistency
An update on regulatory developments
An analysis of portfolio turnover
Fraser Donaldson, Insight Analyst for Funds at Defaqto, said:
"With nine months to go until the new distribution landscape as mapped by the Retail Distribution Review unfolds, the multi-manager industry continues to grow as advisers use these funds as a partial outsourcing of their investment process for clients looking for a simple managed solution.
"For those advisers that buy into multi-manager investing as an outsourcing solution, there is a wide range of processes that can be adopted. However, what is important for advisers to remember is whichever methodology they choose to follow, investment responsibility cannot be negated completely. There are still hundreds of multi-manager funds to choose from and it is here, in the selection process, that due diligence still needs to be carried out."
Advisers can download Defaqto's Guide to Multi-Managers at www.defaqto.com/adviser/ifa/guides.
Defaqto's adviser research tool - Engage - provides whole of market financial product and fund information to support advisers' product research and selection; Engage also helps advisers with partner selection and due diligence, and generates reports for compliance and regulatory purposes.
Defaqto also provides bespoke consultancy for advisers around retaining "independent? status and selecting products as a restricted adviser.
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