The reaction comes in light of a recent FE Trustnet poll that found 83 per cent of our readers prefer building a portfolio of different investments rather than holding a single “all-in-one” multi-asset fund. Richard Hancock, analyst at the Financial Management Bureau, says only professional investors with plentiful resources are qualified to make specific asset-allocation decisions.
"I’m a big fan of multi-manager, even for my own personal investments," he commented. "Even before you take into account transaction costs, multi-managers have far more time and resources than an IFA."
"They can also get access to certain investments that we can’t get exposure to."
A highly rated fund such as Findlay Park American, for example, is unavailable to retail investors, but multi-managers can still access it.
"Moreover, from an adviser's point of view, holding a number of specific portfolios is completely impractical; if I wanted to sell out of a Neil Woodford fund because I liked Threadneedle instead, I’d have to send about 400 letters to all my clients alerting them to the change. It’s ridiculous."
Hancock rates Cazenove’s stable of multi-manager funds particularly highly, as well as David Coombs’ Rathbone Multi Asset Total Return and Multi Asset Enhanced Growth portfolios, and the Baring Multi Asset fund.
Paul Davis of Clear Financial Advice is of a similar opinion:
"Why try and mimic someone like Martin Gray when you can buy the real thing? Yes, you have to pay a little more for the pleasure, but I’m of the opinion that you get what you pay for."
"IFAs and private investors get all the information after the event, which is why you get so many people chasing returns that have already happened."
"Multi-asset managers – well the decent ones, anyway – are proactive rather than reactive, because they have superior time and resources."
Davis is a big fan of multi-manager funds – listing Gray’s CF Miton Special Situations Portfolio and Cazenove Multi Manager Diversity as among his favoured options – but also likes single-manager multi-asset products, such as Sebastian Lyon’s Trojan fund, and Iain Stewart’s Newton Real Return portfolio.
Even if investors manage to select the very best-performing sector-specific funds, it doesn’t necessarily mean they will outperform a proven multi-manager or multi-asset manager.
According to FE data, a portfolio of every FE five crown-rated fund split across the current asset-class weightings in IMA Mixed Investment 20-60% Shares would have fallen short of four funds in the sector over five years.
During this period, the fantasy portfolio would have returned 30.58 per cent – well short of the 57.48 per cent amassed by Steve Russell’s CF Ruffer Total Return fund.
Performance of funds and fantasy portfolio over 5-yrs
Source: FE Analytics
Three other funds in the Mixed Investment 20-60% sector – CF Cautela, Scottish Mutual Cautious and Invesco Perpetual Distribution – have also returned more than the fantasy portfolio.
The fantasy portfolio does come out on top of the sector over three years, however, but only 0.91 per cent ahead of Invesco Perpetual Distribution.
It is the same story in IMA Flexible Investment; a portfolio of every FE five crown-rated fund split across the current asset-class weightings in the sector would have fallen short of five funds over five years.
These include Trojan, CF Miton Strategic Portfolio and CF Ruffer Equity & General. The Trojan fund has also delivered more over three years.