A survey of 100 DFMs conducted by CoreData revealed that while 50% would make the switch after just six months of below-par performance the average firm would tolerate ten months before switching to a new manager.
Cost was far less important than performance and trustworthiness when it comes to making a new commitment, CoreData found. Just under two-thirds, 64%, of DFMs ranked costs as a key consideration in selecting a fund manager, versus 89% and 92% respectively for performance and trustworthiness.
The importance of trustworthiness is also evident when it comes to awarding new mandates to a fund manager the DFM has not previously worked with; while 29% would take more than three months to take the decision to invest with a new fund manager, just 3% would take the same length of time when awarding a new mandate to a manager with which they have invested before.
A spokesperson for CoreData said: “The figures also show the added pressure on a fund manager whose style is out of fashion as DFMs are unlikely to give them the time to come back into favour and make up for any potential losses.
“One can understand why managers are nervous about deviating away from the pack and this perhaps reflects the tendency (and common criticism) of active managers for being benchmark huggers despite charging active fees.”
A survey conducted earlier in the year by Investec found around 50% of advisers intended to outsource to DFMs as a result of RDR.
