An Introduction to Multi-Manager Funds

Asset Manager - An Introduction to Multi-Manager Funds

An Introduction to Multi-Manager Funds

The term multi-manager fund is one that you will often see in investments circles whether you are a inexpressive or institutional investor. As with many financial terms it certainly describes a characteristic of a type of speculation vehicle which can in turn join many other features.

Asset Manager

A Summary

The term can be applied to exact investments which come under the umbrella of communal investments. In other words, at a high level, they are investments which wish citizen to pool together their money to buy the basal securities. A multi-manager fund can therefore come in a few guises such as Unit Trusts (funds with ranging numbers of units) speculation Trusts (i.e., speculation Companies, with a fixed amount of shares on the market) and Open Ended speculation fellowships (Oeics, an speculation company open to fluctuations in share numbers) among others.

To be defined as a multi-manager fund, the speculation must essentially involve or join a amount of dissimilar fund managers in its running. The key driver behind multi-manager funds is the diversification they offer in spreading risk over numerous fund managers who may accomplish better with singular assets in singular markets.

There are two main ways in which this can be achieved - that is two structures that the funds can utilise - each with their own benefits and drawbacks: A Fund of Funds (Fof) buildings or a employer of Managers (Mom) structure.

Funds of Funds

The principle characteristic of a Fund of Funds is that it is a singular fund which then invests in a amount of basal funds rather than directly into securities itself. This means that it is the Fund of Funds manager's responsibility to evaluate and manage which of the basal funds the Fof will be invested in.

The employer will need to correlate the credentials of each basal fund based upon its past performance, basal investments, adherence to the aims, asset classes and risk profiles of the Fof and to a large extent the doing of the basal funds' managers themselves, before constructing the portfolio. Once they have done so the performances of the basal funds are solely in the hands of the numerous fund managers. If funds don't accomplish the Fof employer can only decree to switch to other funds.

The Fof can whether be constructed to spend in a range of themed funds based upon the risk profiles of each, or be restricted to a singular asset class in accordance with the objectives of the fund. What's more, most Fofs will be unfettered, that is, they have the scope to spend in whichever funds that are available on the shop that they deem appropriate, but a few fettered funds are exiguous to those from the same speculation company.

Fofs advantage from the possible advantages of all multi employer funds, diversification and the spreading of risk. Furthermore, they can offer a inexpressive investor a way of getting their money into non-retail funds - those funds that are reserved for institutions to spend in only - giving them greater choice. Investors are also not liable for paying Capital Gains Tax (Cgt) when monies are moved from one basal fund to other whereas they would if they had invested in those funds directly.

However, this dual layer buildings does mean that costs may be incurred at both fund levels and therefore Fofs tend to prove more expensive as running costs accumulate.

Manager of Managers

A employer of Managers fund does not spend in basal funds as its recipe of diversifying over complicated managers, but instead employs the numerous fund managers directly within a singular fund, usually each with responsibility to manage investments in a exact asset class with what is termed a segregated mandate.

This approach not only, in principle, spreads the risk as results are not fully dependent on a singular fund manager, but also allows an total fund employer to bring in specialisation in each sector and therefore, hopefully, greater returns. The funds do still advantage though from unified operate as the employer of managers will be aware of all speculation action carried out by the other fund managers. In addition, this awareness applies directly to the assets in which the fund invests because there is no secondary level of funds involved.

Moms often advantage from lower running costs. The switching of monies from one asset class to other for example (and therefore one fund employer to another), does not incur the costs that would be a factor if the monies were switched from one fund to other under an Fof. However, the funds do still way the discounted speculation costs that are available to institutional investors, due to the large scale of their transactions, which can then be passed on to the fund's investor.

There are many differing speculation options that lie within the boundaries of the Multi employer Funds definition and each comes with it its own levels of risk depending on the expertise of the fund managers, the diversification of the basal investments, the differing themes or asset classes and to some extent the costs involve. Therefore it is all the time important to make sure you get advice from a grand expert before choosing to spend in such complicated investments.