Multi-managers’ 10 favourite funds
FE Trustnet reveals the most popular products among funds of funds, but the list contains few surprises.
By Mark Smith, Reporter, FE Trustnet
Wednesday May 02, 2012
erdeen Emerging Markets, AXA Framlington UK Select Opportunities and JOHCM UK Equity Income are among the 10 most-held funds by multi-managers, according to
FE Trustnet research.
Ten most popular funds among multi-managers
Source: FE Analytics
Funds-of-funds are aimed at investors who want all the advantages of broad diversification across a variety of asset classes and investment themes without having to worry about shuffling their own portfolio.
Multi-managers take all the responsibility for managing asset allocation in respect of wider risks and opportunities in the market, saving the investor, or their adviser, the effort.
The disadvantage is that this extra layer of management comes at a cost. Data from
FE Analytics shows that the average multi-manager fund has a total expense ratio of 1.91 per cent versus an average of 1.55 per cent from the market and it is not unusual to see multi-manager funds with TERs in excess of 2.3 per cent.
However, this study offers a glimpse of the most popular funds with multi-managers, which investors can access without having to pay the extra layer of charges.
Five of the funds in the list are headed-up by FE Alpha Managers and all have a lengthy track record. The top-performing Aberdeen Emerging Markets fund is the most popular. Over the medium- and long-term the fund has been one of the most consistent emerging markets products in the IMA universe.
Over the last 10 years it has returned 382 per cent versus 219 per cent from the IMA Global Emerging Markets sector average.
Performance of fund vs sector over 10-yrs
Source: FE Analytics
FE Alpha Manager Angus Tulloch’s First State Asia Pacific Leaders portfolio is an emerging markets fund with a similarly impressive track record. Since the fund’s launch in December 2003 it has returned 257 per cent versus 169 per cent from the average Asia Pacific ex Japan fund.
Turning to the UK, it is the usual suspects once again. The likes of Schroder UK Alpha Plus, AXA Framlington UK Select Opportunities and Artemis Income are among the best funds in the UK market, albeit each with their own unique, high conviction approach to finding the best-value stocks.
In the fixed income space it is a similar story. M&G Optimal Income and Invesco Perpetual Corporate Bond are funds that are often recommended by IFAs.
The fact that there are no surprise inclusions in the list raises the question as to why people with even a casual interest in the investment industry would bother to use an expensive fund-of-funds portfolio.
"The main argument is convenience," said AWD Chase de Vere’s Patrick Connolly. "You can buy it and leave it alone and not worry about it all night long."
The presence of the Ireland-domiciled $6.9bn Findlay Park American fund could be another reason. Multi-managers can access offshore, niche or specialist mutual or hedge fund strategies that are not appropriate for the average investor.
"There are a select number of lesser-known funds which often appear in fund-of-fund portfolios which multi-managers can access far more easily than you or I," explained Connolly.
"But you’ve got to question the value this type of fund offers against alternatives. I would say it’s probably not a great deal extra."
FE Trustnet research also reveals that passive funds such as the Vanguard US Equity Index, iShares FTSE 100 and BlackRock CIF Emerging Markets Tracker are also popular among multi-managers.
Five most popular passive funds among multi-managers
Source: FE Analytics
"Sometimes managers look to trackers because in saturated markets like the UK and US it is difficult to find active funds that consistently outperform," Connolly continued.
"But increasingly, and with RDR being introduced next year, fund managers are becoming more conscious of the impact of charges on their performance."