Two main approaches exist to running multi-manager funds – fund of funds and manager of managers. The former invests directly in the retail funds of asset management firms, while the latter draws up individual mandates for each asset manager. Funds of funds can be further distinguished as fettered or unfettered products. The former invests only in funds run by the same asset management group as the multi-manager fund.A major difference between the two models is cost. Funds of funds generally have higher total expense ratios (TERs), as investors essentially are charged twice – once for the multi-manager and then again for the management costs of the underlying funds. Funds of funds typically have TERs of more than 2%, although Fidelity has pledged to keep the TERs of its two new funds of funds, launched last week, capped at 2%. Manager of managers products generally charge TERs below 2%; for example, the charge on Axa’s manager of managers growth fund has a TER of 1.85%. A further difference between the two models is that because they have a legal agreement with a manager, manager of managers funds are able to exert control over the investments they have assigned – and over which funds of funds have no jurisdiction.