Market turbulence fails to sink multi-managers

Multi-managers appear to be weathering the current market volatility better than most, with some companies even reporting net increases in fund flows, according to the latest multi-manager sector review conducted by ratings house Lonsec.

The relative stability of the multi-manager sector was underlined by the fact that Lonsec made only one rating change, with Russell being downgraded from ‘highly recommended’ to ‘recommended’ as a result of changes within its multi-manager team.

Discussing the sector, Lonsec said funds under management (FUM) had contracted by approximately 12 per cent from $231 billion in September 2007 to approximately $210 billion in September last year, predominantly on the back of negative performance.

It said Intech had experienced the largest drop, with FUM falling by 43 per cent to $7.4 billion due to the 2007 figure having incorporated the Skandia business.

It said MLC had experienced a 26 per cent fall in FUM from $85 billion in 2007 to $62.6 billion in 2008 while, on the upside, Advance, AMP, Fiducian, Mercer and United had seen net increases in FUM year on year.

The Lonsec review said MLC remained the largest multi-manager by FUM in the Australian market with more than $62 billion in funds managed, followed by AMP with $22 billion, Russell with $20 billion, Colonial First State with $15.6 billion, ipac with $14.1 billion, AXA with $14 billion and Mercer with $13 billion.

It said the combined Advance/BT Group would become the ninth largest multi-manager in the sector with a total of $7.25 billion in FUM.

At the lower end, the smallest multi-managers assessed by Lonsec were Custom Choice at $865 million, which is soon to be further reduced upon closure of the majority of the product set, Navigator with $1.2 billion and Fiducian with $1.26 billion.

The Lonsec analysis said there was a correlation between the level of FUM and the number of years multi-manager funds had operated and that brand recognition and tied distribution may have contributed to this.

However, it said against this trend were the relative new entrants AMP and Colonial First State, both of which had strong tied distribution and established growth in multi-manager assets.