Multi-manager funds: {A SAFER PASSAGE} through a volatile market?

Why use multi-managers?

Multi-manager funds take care of all of these issues for you. With a devoted, full-time, skilled and experienced team of professionals overseeing and continuously managing the investment, the asset mix and the underlying fund managers you can spend less time worrying about the market and more time with your clients.

Risks vs rewards

Every investment involves a certain degree of risk. The power of asset allocation really lies in successfully minimising 'market risk' – the exposure that an investor has to a particular market to achieve a desired return.

Typically, the asset allocation decision drives around 85% of the overall return and volatility within a balanced portfolio. This makes it the most important factor in a client’s investment strategy. Spending time selecting individual managers to gain the desired asset allocation exposure is a second order decision in terms of market performance but can carry significant specific risks if something was to happen to that manager.

Unrewarded risks

The other risks to an investment come from specific events, developments or actions. They can be anything from the departure of key investment personnel or an investment manager deviating from their process, to a particular fund underperforming due to a trading irregularity or sudden bout of redemptions. Taking on these types of risks does not offer the potential for higher returns – that is, they are ‘unrewarded risks’.

When structuring a balanced portfolio it is important to look at the type of risks being taken and not just the amount of risk. For while the decision to invest in only Australian shares may pay off if the local sharemarket soars – investing with a low quality fund manager has no further upside but can have significant downside implications.

What’s more - when markets are volatile, the chance of a manager suffering from one of the issues above are even greater.

Rewarded for risk

By spreading an investment across several managers, multi-manager funds provide an efficient way to minimise unrewarded risks.

Advance has a dedicated team of seasoned professionals blending fund managers day after day. Our process aims to maximise the potential return for a given level of rewarded (or market specific) risk while cutting out as much of the unrewarded risk as possible.

To achieve this we conduct extensive due diligence, stringent analysis and ongoing monitoring of the underlying managers.

As a result our multi-manager funds offer:

• investment process and style diversification within one fund
• the ability to target ‘alpha’ by emphasising the weighting of certain managers
• the scale to access boutique managers not available to most investors
• inbuilt diversification that helps avoid a single manager crisis
• tax effectiveness via minimal rebalancing
• reduced complexity around distributions
• significantly more flexibility in terms of responding to manager situations that arise.

Our multi-manager product aims to give your investors greater diversification and make your job easier. Through more active management, we have the potential to achieve smoother returns during volatile times.

Speak to your Advance BDC

Your Advance Business Development Consultant can help you implement a multi-manager solution, either through a diversified portfolio or single sector allocation, that will work for you and your clients.