Multi-managers lack consistent performance, Defaqto suggests

Very few multi-manager funds have been able to perform consistently over recent years, according to research by Defaqto.

The financial research company says just 25 multi-manager funds of the 184 covered by its QuantRater service have maintained a rating of three, four or five since June 2008.

According to Defaqto, the lack of stability in these ratings, which are based on the fund’s consistency and performance, brings the reliability of the products’ returns in question.

Fraser Donaldson, insight analyst for funds at Defaqto, notes that the multi-manager space is growing as advisers look for ways to outsource in the lead-up to the retail distribution review (RDR).

Figures by the company show 26% of advisers currently outsource to a multi-manager and this is expected to increase as RDR’s implementation at the end of the year draws closer.

Donaldson says: “For those advisers that buy into multi-manager investing as an outsourcing solution, there [are] a wide range of processes that can be adopted.

“There are still hundreds of multi-manager funds to choose from and it is here, in the selection process, that due diligence still needs to be carried out.”