Multimanager sales rise as trackers see surprising dip
RDR is pushing more and more clients into multimanager funds, figures suggest.
Sales of multimanager funds to retail clients were at their highest since the second quarter of 2011, according to IMA figures.
Funds under management with multimanager portfolios were up more than £2.3bn on the equivalent period last year, with analysts blaming the rise on the ramifications of the Retail Distribution Review (RDR).
The popularity of tracker funds slowed however, with sales down 41 per cent from the second quarter of last year.
AWD Chase de Vere’s Patrick Connolly (pictured right
) says the popularity of fund of funds is no surprise.
“Firstly, some IFAs are recognising that they’re not capable of picking individual funds. Then there are those who are protecting their trail commission, as investors are less likely to sell out of their multimanager funds after RDR comes into force,” he said.
Tim Cockerill, head of collectives research at Rowan Dartington, says investors need to watch the charges on their multimanager portfolios.
“Charges are always an issue with funds of funds. You get a double layer of charging. Some TERs have a habit of being rather high.”
“When you consider that the client used to pay the IFA as well as the fund manager, it’s not at all clear the client is better off. If you want discretionary management you need to pay for it.”
|Retail Sales (Net)
|| Q2 2011
|Funds of Funds
Richard Saunders, IMA Chief Executive, said: “Net retail sales of funds of funds went above £1bn in this quarter for the first time in a year."
"While the second quarter saw more subdued sales of tracker funds, their share of total funds under management has been rising for about four years and now stand at 7.5 per cent.”
The dip in the popularity of tracker funds was unexpected. Cockerill (pictured left) commented: “It’s surprising because there has been a strong movement to passive investments recently."
"Standard Life did some work that showed investors decisions are increasingly being driven by macro factors, which is favouring passives.”
“I wonder if we might be seeing a move from conventional passives to the cheaper ETFs, but we have no figures to suggest that.”
Connolly said: “I think trackers will become more popular, as investors put more emphasis on cost."
"If you look and see what trackers are tracking, the indices haven’t been doing very well. People are more nervous about losing capital from the index doing badly than from charges.”
Overall, the figures suggest weak demand for investments, with sales £3.3bn down on the same period last year, perhaps supporting Connolly’s contention.
While £1.1bn of multimanager funds were sold in the second quarter this year, in the same period last year there were £2bn of sales.
The IMA also picked out retail sales of ethical funds for consideration, showing that they saw net outflows of £2m, down from inflows of £101m for the same period last year.
Both commentators said it was hard to see a trend in these figures, describing the investments as a niche area.