Many advisers are none too confident about the differences between the various species of fund-of-funds/multi‐manager and multi‐asset funds, according to Platforum research. So when is a multi-asset fund really using a direct multi-asset approach and does it matter if the underlying structure turns out to be a fund-of-funds?
The lines between the different types of funds seem to have become somewhat blurred in many advisers’ minds.
Lots of high-profile multi-asset fund ranges employ a fund-of-funds structure. Think Vanguard’s LifeStrategy or Quilter Investors’ Cirilium – two flagship ‘multi-asset’ ranges. Vanguard employs the ‘fettered’ approach of choosing to invest in other Vanguard single strategy funds and ETFs. In contrast, Quilter’s are ‘unfettered’ – aiming to pinpoint the best fund managers in their asset classes from a larger pool of talent.
Fund charges play a big role in fund selection and many advisers have been turned off by the elevated charges levied by most fund-of-funds, and are instead looking for cheaper multi‐asset solutions. Advisers are most likely to use either as one-stop shop solutions for their less wealthy clients.
Multi-asset funds also remain popular with self-directed investors. 53% claim to hold a multi-asset fund in their portfolio and 36% say they hold a multi-manager fund. Hargreaves Lansdown’s multi-manager range had grown to £8.5bn by the end of 2017 (and, case in point, even though marketed as multi-manager, several of the funds are also diversified across asset classes).
But value is the flavour of the hour for intermediaries and ultimately end-investors. Whatever underlying structure a fund employs, there remains considerable merit in – and demand for – a benchmark-beating fund with competitive charges to boot. Piece of cake, right?
The trends in the distribution of multi-asset and multi-manager funds will be looked at later this year within our UK Fund Distribution series. Download an outline of our 2017 report here or get in touch for more information.