Australia’s multi-manager funds have too much exposure to in-house products, too many inefficient mandates with unit trusts, and are confused about alternative investments, according to Lonsec annual review of the sector.
Of the nine multi-manager growth funds (growth assets 61-80 per cent) assessed by Lonsec, Russell Investment Group was the only one to receive the best possible ‘Highly Recommended’ rating.
‘Recommended’ ratings went to products from BT, Skandia, MLC, Zurich and ING’s OptiMix.
Coming up the rear were Colonial FirstChoice and Australian Unity, assigned an ‘Investment Grade’ rating for their multi-manager growth funds.
Lonsec senior investment analyst Amanda Gillespie said that Russell, as a large multinational asset consultant, escaped the criticisms of the sector relating to in-house bias and too few discrete mandates.
Although multi-manager funds are often derided as over-engineered and expensive, Gillespie said she was “surprised” to find their average fees were only 5 to 10 basis points higher than single-manager growth funds.
Zurich was the cheapest provider, while Gillespie said “no-one stood out” on the dearer side.
Compared to their single manager peers, multi-manager funds delivered higher returns for less risk over the five years to December 31, but their returns were inferior over the last 12 months.
Gillespie suggested they all needed to clarify their stance on alternative investments.
An adviser whose client’s portfolio was less than $150,000 might find a multi-manager fund to be a one-stop investment solution, with decent if unspectacular risk-adjusted performance, Gillespie said.
