LAST UPDATE 27 FEBRUARY 2020

First among equals

Multi-manager is a popular strategy, but some multimanager funds are cut from a finer cloth…

Multi-manager funds are a popular category with investors and for a reason: the ability to ‘fire and forget’ by investing in a one-stop investment shop is tempting for those of us without the time, experience and money to allocated and then repeatedly rebalance our own portfolios.

However, that doesn’t mean these seemingly simple vehicles are a panacea. While investors look to these funds to invest across a range of stocks and asset classes, there is a risk that too much diversification can lead to sluggish or muted returns, or leave a fund open to criticism as an ‘index-hugger’ offering little more than a passive vehicle, but at higher cost.

At the same time, investors in mainstream open-ended multi-manager funds can face a serious downside, in the form of multiple layers of fees. While these funds charge a fee to manage your investment, the underlying funds they own will also be charging a fee. Although multi-managers can negotiate these underlying fees down from their ‘street’ rate, the cumulative effect can result in charges of 150 basis points or more, which over years of compounding become a serious outlay.