Multi-Manager Funds are also known as Fund of Funds, they are funds that invest in other funds and managed by the multi-manager. Essentially, Multi-Manager Funds are trying to emulate the job that you as an investor would be doing.
When investing in Funds you would look to choose more than one in order to have a well-diversified portfolio. However, you may not be fully confident in doing this. This is where Multi-Manager Funds come in – you will essentially invest in one Fund yourself that has actually invested in lots of different Funds.
Outsourcing or shall we say delegating the picking of funds…
It’s outsourcing the role of picking Funds. In theory these Funds can help lower-risk and diversify your portfolio as the Multi-Manager will have experience of portfolio fund selection.
Just like investing in a normal Fund, you will be able to see the objective of a Multi-Manager Fund, it’s top 10 holdings, Ongoing Charges Figure and of course it’s top 10 holdings. For example, looking at one UK All Companies Multi-Manager Fund with a Growth Objective shows holdings in Funds such as:
- LF Lindsell Train UK Equity
- JO Hambro UK Equity Income
- Malborough UK – Micro-Gap Growth
These are all funds that you could invest individually yourself, but the Multi-Manager fund invests in them and a number of others.
And there’s a catch…£££
So what’s the catch? Well like any investment, there is no guarantee that the Multi-Manager Fund will perform well. Likewise, they won’t necessarily perform better than if you had actively picked the Funds yourself.
However, the biggest catch with Funds of this nature is the increased cost. While investing in a standard fund you’d be subject to an Ongoing Charges Figure of around 0.5-0.75% (and even much less for a Tracker Fund), for a Multi-Manage Fund you’re looking at a a minimum of at least 1% which could rise to beyond 1.5% for some Funds.
The increase cost is due to the very active nature of the Multi-Manager in the process.
These increased fees are inn addition to the fees that your Online Platform will charge in general for holding your investments.