It goes without saying that investors prioritise different criteria when it comes to picking the manager they feel safe entrusting their money with. However, the debate as to whether investors should be concerned if a manager is running more than one mandate seems to be particularly divisive, having spoken to a selection of investment professionals.
While some investors believe that there are a wealth of managers who are able to run a vast selection of mandates while retaining strong overall performance, others argue that it can cause managers to become distracted and to spread their time between different investment vehicles too thinly. 
Chris Metcalfe (pictured), managing director at IBOSS, says the firm specifically opts for fund managers that are only running one or two mandates and argues that it is a warning sign if a manager runs too many simultaneously.
“When we see managers running multiple mandates, it causes us concern,” he said.
“It’s not actually possible to say how many funds a manager is capable of running, but we would rather see managers concentrating on one or two funds, preferably within the same asset class.”
“You can see when you look through factsheets that there are managers running six or seven funds across different markets caps, with different aims, and you just wonder how they’re doing it.”
However, Wellian’s Richard Philbin says that it depends on the circumstances and points out that multi-asset managers such as the team at Standard Life GARS successfully run a lot of sub-mandates within one strategy.
Performance of fund vs FTSE 100 since launch
Source: FE Analytics
Also, he believes that the likes of Miton’s Gervais Williams running UK small-cap, micro-cap and multi-cap portfolios simultaneously isn’t a cause for concern as they have an overarching theme in that they’re UK equity portfolios and adopt the same investment philosophy and process.
However, if the manager were to take on a Japan fund for instance, Philbin would call into question whether to follow the manager at all.
“The skill set needed to run a single strategy fund is not the same as if you were running a multi-strategy fund,” he said.
“You generally find that when you look at funds with multiple strategies within them that there is a team involved and this gives some confidence.”
The chief investment officer says that the overarching fund rules themselves contribute to the running of multiple asset classes by one manager. He uses FE Alpha Manager Richard Woolnough’s £14.9bn M&G Optimal Income fund and the five crown-rated Invesco Perpetual Monthly Income Plus fund as examples, as they are both able to invest in equities as well as fixed income assets.
Philbin adds that the running of a fund can be divided in other ways and points out that, within the team at Schroder Income Maximiser for example, one manager will select stocks while another looks after its derivative overlay.
“We have no issues in investing with managers that do invest in multiple asset classes (we have a number of global funds for instance – Fundsmith, M&G Global Dividend, Old Mutual Global Equity Absolute Return) as long as we can understand the interaction between the individuals and the clarity of the process,” he said.
Adrian Lowcock, head of investing at AXA Wealth, agrees that there are plenty of examples of managers that run various mandates simultaneously who are successful, such as Terry Smith, Kevin Murphy and Nick Kirrage.
However, he says that the reason these managers have been successful is because they use the same clear-cut underlying investment philosophy and process in each of their funds.
“There are occasions where fund managers run mandates which materially differ from each other - the issue here is that few managers have a process which works across all markets and investment styles and the ability to switch between styles is not an easy one,” he explained.
“A manager focusing on income in shares looks for different things to a growth manager. That said there are managers who do work across different mandates – the fundamental process however is often the same.”
“A UK manager running a growth fund might roll out the process to a global fund for example. However, success in one market doesn’t guarantee success in another. The investment knowledge of the UK, for example, is not replicated globally and would require a lot more work and experience which isn’t already there.”
An example of a manager who runs two different funds is Neil Woodford, who is famed for investing in the equity income space following the success of Invesco Perpetual Income during the 24 years he ran it.
Over his tenure, the five crown-rated fund made a total return of 874.18 per cent, outperforming its sector average by 537.36 percentage points.
Performance of fund vs sector under Woodford
Source: FE Analytics
What’s more, if an investor had held £10,000 in the fund throughout the entirety of Woodford’s tenure, they would have earned a total income of £18,252.
When the star manager left the firm to launch his own asset management company though, many investors were surprised to see that he launched a closed-ended small-cap trust – Woodford Patient Capital – after his UK equity income fund.
“On the surface the two funds are polar opposites but actually they draw from the same investment philosophy and tap into the same research,” Lowcock continued.
“Woodford had already been doing a lot of research into smaller companies whilst at Invesco Perpetual and his income fund held some of the stocks.”
“Given he had the experience of investing in the smaller companies space it wasn’t a big stretch for him to set up the Patient Capital trust. Of course it is far too early to judge whether he was right to do so.”
Informed Choice’s Martin Bamford agrees that Woodford is a good example of a manager who is able to run multiple mandates, pointing out that the manager is responsible for running Openwork’s Omnis UK Equity fund, the St James’s Place UK High Income fund and mandates for Skandia and Hargreaves Lansdown as well as Woodford Equity Income and Woodford Patient Capital.
While he says that investors shouldn’t be too concerned if a manager is running similar mandates, he warns that investors should take care when opting for a manager that is running several different mandates with slightly different approaches – even if they do have an experienced investment team to support them.
“As part of our fund selection process at Informed Choice, we look for funds where the managers are focused on managing one or possibly two funds. If we identified a potentially suitable fund where the manager was responsible for several different mandates, it would prompt us to look more closely at the resources available to that manager,” he said.
“When selecting a fund manager, we believe the most important criteria to consider are risk-adjusted returns, consistency of performance and cost. It is worth keeping in mind that fund selection plays a very small part in the long-term success of an investment portfolio, compared to asset allocation decisions which tend to drive returns.”
