For pension investors a multi-manager approach may provide a better-performing alternative to single-manager with-profits funds, according to insurance analyst Ned Cazalet of Cazalet Consulting.Commenting in an independent report sponsored by Jupiter Asset Management, Cazalet notes that although the with-profits sector is still 350m in size, returns for some funds will not climb above 2.5% or 3% a year. This is largely because of management fees, taxation and charges for guarantees. Cazalet suggests advisers should review their existing with-profits holdings and separate those that deliver steady returns from those that he says “now look incapable of delivering decent policy values to customers”. He adds that advisers should consider actively managed investments, which are more likely to meet investors’ asset allocation and financial planning objectives. A successful multi-manager fund should be able to provide investors with better value through improved medium and long-term performance, reduction of risk and reduced volatility of returns, says the report. According to Justin Modray, an investment adviser with BestInvest, it is unlikely that with-profits will emerge as a prominent investment type again. The main reason, he says, is that many of the funds have had to cut equity exposure because of a reduction in solvency capital. As a result the sector missed out on much of the stockmarket recovery, he says. “Moving into funds of funds or multi-manager means investors will get more exposure to equities,” says Modray. He warns, however, that the gap between the best and worst funds in the asset class is still large and some investors will be paying two sets of charges.