As the industry heads towards a global market, where geographic and product boundaries no longer exist, multi-manager can be an innovative solution for advisers and their clients, says Bill McQuaker, director of multi-manager at Henderson Global Investors.
"When I started in the industry some 20 years ago, the business was much more compartmentalised," he says. "Nowadays managers have a much wider canvass to work on with - for example, bond managers now having to consider government, corporate and high yield bonds as well as derivative instruments."
McQuaker believes this will result in advisers having to pick the best investments for their clients from one global pool - and having to ask themselves whether they have found multi-managers with the right breadth and depth of skills for the job.
"Multi-manager has also changed in recent years," he continues. "Nowadays, the industry has become something of a battlefield with a plethora of new entrants and with the market now on the same axis as everyone else - performance-based.
"This is in stark contrast to six or seven years ago - when I wish I had been involved in the industry - where there were a limited number of groups and one could sell the product on concept rather than performance."
McQuaker expects the new regulation changes implemented by the Coll rulebook to be both beneficial and detrimental for managers. "It can be an exciting opportunity to produce a genuine multi-asset fund with a chance of genuine risk-adjusted performance," he says. "However, by the same token, it can offer managers a raft of new ways to mess things up."
With all these changes coming at a rate of knots, McQuaker picks out seven reasons why multi-manager is as attractive as it has ever been. The first three of these - "asset allocation matters", "monitoring is a must" and "bold is often best" - are particularly relevant to the man on the street, while the rest - "time is precious", "investment is more technical", "multi-manager delivers on performance" and "the future" - are more adviser-focused.
"With asset allocation, too often the man on the street has had his money in the wrong place at the wrong time and he's had it in bulk," says McQuaker. "Multi-managers can avoid these errors and, if they do their job well, should be able to enhance returns.
"With the number of funds growing exponentially in each sector over the past decade or so, multi-managers can also help advisers tackle the problem of evaluating products and managers as well as innovation when time is the rarest commodity in their business."
Looking ahead, McQuaker points to the hedge fund world, where the best managers often run funds that are now closed, as a precursor for what is going to happen to the long-only market - particularly as capacity becomes more of an issue. "In this case, it will be important to establish even stronger relationships with top managers in the future," he concludes.
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