The power of many - Aspire Planning Group

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The power of many

If you’d like to have your investments looked after by a group of experts, who can adapt to meet changing market conditions, it’s time to discover multi-manager funds.

Like many investors, you may already be aware of the benefits of diversifying your investments across different types of assets, such as shares, property, cash and fixed interest. But have you thought about diversifying across different types of fund managers?

Single vs multi-manager

In a single fund, an individual fund manager controls the portfolio and makes all the investment decisions.

Fund managers come in all shapes and sizes. The way they invest your money can vary widely, from passive to active and growth to value.

  • Passive or active – passive managers aim to match a benchmark such as the All Ordinaries Index, while active managers aim to outperform such benchmarks. An active manager’s performance is driven by their skills and styles, such as in the way they approach stock selection and market timing.
  • Growth or value – value managers look for bargain stocks they believe are undervalued by the market, while growth managers look for strong performers in industries with what they see as good prospects.

The reality is different fund managers tend to perform better in different conditions. In some conditions, a value fund manager might deliver the best returns, while at other times a growth fund manager might be a better option.

The problem is, it’s difficult to predict the market and you can’t easily chop and change between funds.

However good their track record, fund managers are still likely to experience periods of short-term fluctuation in performance. Also, previous results may not be an accurate indication of future performance. Last year’s stellar performer can end up with this year’s wooden spoon.

If you’re investing for the long term, you may be able to ride this out, but it can make for a bumpy ride. And your options are limited if your fund manager isn’t doing well. You can sit tight and hope your returns improve… or you can cut your losses and move to another fund, realising your losses along the way.

Spreading the risk – best of the best

One solution is a multi-manager fund.

A multi-manager fund brings together a number of individual fund managers, with different styles and different philosophies, in one portfolio. The idea is to reduce the level of volatility and create more long-term value.

So what do multi-manager funds offer?

  • Diversification – Spreading your investment across different types of assets, using different fund managers with different investment styles, can help to reduce your risk.
  • Specialisation – While single manager funds use one manager to invest in different types of assets, multi-manager funds can use specialist fund managers who have a deep understanding of their particular asset class to make these investment decisions. Some of these specialists may not be available to individual investors.
  • Simplicity – it’s a complex world out there. Many investors simply don’t have the time to pick their way through the daily chatter of economic and financial news to work out the best individual fund manager for their needs. A multi-manager fund chooses the funds and makes the decisions, making the choice for you.
  • Expertise – You can benefit from an expert hand at the helm, directing your portfolio through choppy investment waters and closely monitoring fund performance. The overall fund manager will choose funds, monitor performance and change individual fund managers if necessary.
A space to watch

With nearly $122 billion invested in multi-manager funds[1], Australia is a significant market for this type of fund management. Australians may be realising the benefits of tapping into the expertise of different fund managers and spreading their risk.

If you’re interested in exploring the multi-manager concept as a solution for your investment needs, please call us today.



[1] Mace, J. (5 June 2012). Taking a fresh look at multi-manager funds. Retrieved from http://www.moneymanagement.com.au/expert-analysis

What you need to know

Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.

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