IMA statistics show that in the last ten years, assets invested in multi-manager funds have increased by almost 600%, from around £11bn in 2001 to approximately £63.5bn in 2011.
Defaqto research has also found that 23% of platform users outsourced to a multi-manager in 2010.
The independent financial research firm said it seems likely multi-manager funds will continue to be an important outsourcing route for advisers in the run up to 2013 and beyond.
Sally Moloney, independent financial adviser at Chartwell Independent, agreed: "Before RDR I know for a fact that we all had some sense of cross-subsidisation among some clients. You ran large portfolios and could spend longer on smaller portfolios because of the money raised from managing the large ones."
She said that post-RDR IFAs will not be able to put as much time into researching smaller client’s portfolio allocation because they would not earn sufficiently to do so.
"I think the use of multi-manager and risk rated funds will increase as a result of that alone," she added.
Benefits of outsourcing to multi-managers include a freeing up of internal resources, access to past performance data of fund managers to ensure transparency and an ability to retain control of some aspects of the investment process.
But Defaqto warned that given the dynamic nature and size of the sector, effective due diligence is still necessary.
Fraser Donaldson, Defaqto’s insight analyst for funds, said: "Given the sheer size of the multi-manager industry and pace of change we are seeing, advisers looking to outsource through this channel need to undertake a robust due diligence process to ensure they select appropriate investment partners for their business and ultimately their clients."
But Moloney said using multi-manager and risk rated funds was a way of outsourcing due diligence because scrutinising the minutae of a fund’s underlying stocks was not the role of an IFA.
"You have risk rated portfolios to choose from and you need to look at the under-lying fund managers being selected, but you don’t have any control over them. Very few IFAs actually do due diligence on funds in terms of looking into the actual shares held.
"We are not geared up to it and we have to outsource it to experts [the fund managers] who are meeting the managing directors of these companies," she concluded.
