In the case of Morningstar, multi-manager funds are lumped in to the multi-asset category for comparison against average charges, rather than being compared solely against other funds of funds.
Goldsmith argues this is not unfair as they have to judge everyone on cost.
“If we single people out then it would be unfair.”
He adds: “I have some sympathy for multi-managers because it is difficult to get charges very low with that type of product but at the end of the day the way Morningstar sees things, our underlying principle, is we look at it through the eyes of the investor and put investors first.”
There is a case for paying more for products such as multi-manager funds that offer diversification and the benefit of doing the job of fund selection for you, but as the downward pressure on fees continues, how bright is their future?
Investment Quorum’s Lee Robertson said the job of defending their charging structures “is definitely becoming harder in the current climate of real scrutiny, particularly if there is a lack of alpha”.
But yet multi-manager funds do retain a place in the investment world, and perhaps the industry is doing them a disservice in judging them solely on charges rather than performance.
As F&C multi-manager co-head Gary Potter said last week, “If I was 65th percentile because the fees were a real drag and we were just picking poor managers and tracking the index then I would understand. But we’re not.”
Perhaps it is time to refocus on outcomes rather than solely on percentage charges when judging the viability of a fund or manager.
