Multi manager funds

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In general, the term multi management includes a multitude of different concepts, which include management by more than one investment manager or investment in more than one investment fund and which also take the form of different vehicles, for example mutual funds of funds , special funds of funds, master / segment funds or asset management Tobe offered. Some providers, using a generous definition of the term, also refer to conventional funds of funds, which funds from non-group fund companies are added to, as well as Master KAG mandates with two investment advisors as multi-manager products.

qualification

A multi-manager product in the narrower sense typically offers the investor the opportunity to cover the entire value chain of the investment process such as asset allocation , manager selection, risk management and administration with a single product. He has access to different fund managers and investment styles via a portfolio . With a broadly diversified portfolio, the multi-management approach can achieve a good risk-return profile. For this purpose, more and less volatile as well as low or negative correlating segments are to be combined appropriately.

The empirical data show that different investment styles can have very different successes over the same period. A mixture of different investment styles therefore generally reduces risk.

Diversification

Multi-manager funds offer broader diversification than individual funds because they distribute the fixed assets over several fund managers. They allow access to different investment styles, company sizes, countries and sectors. Multi-manager funds generally hold more individual stocks than traditional individual funds. However, the right manager selection is feasible for very few investors because of the high cost. In some areas, one orientates oneself on the rankings and ratings of the mutual funds. However, this can only be superficial, as the individual specifications of the investor are not taken into account. Consultants who specialize in the selection of asset managers can help. A consideration is made from a qualitative point of view such as investment style and performance potential as well as quantitative criteria such as track record and transaction cost control with the aim of identifying the best sustainable asset manager in each investment segment. Furthermore, there will usually be an improvement in performance through the use of specialists with different investment styles and philosophies. The combination of the best asset managers for the respective segment in connection with style diversification significantly increases the probability of a steady increase in return compared to the benchmark. Such a fund reduces the investor's risk of missing out on a new investment style if the market trend shifts in favor of the value or growth style. A multi-manager fund structures individual fund managers in such a way that their investment styles and performance correlate as little as possible, thus achieving a broadly diversified and style-neutral portfolio. The risk-optimizing component of multi-manager portfolios comes into play in difficult market phases. The specific risk of all individual positions is controlled by the responsible individual fund manager. The risk that can result from the combination of investment styles is reduced by the special manager combination. Multi-manager funds have so far been able to deliver comparatively consistent returns to their investors even in stormy times.

Manager selection

The success of a multi-manager fund depends to a large extent on the identification and selection of outstanding managers and their best possible combination. An optimized selection means that the multi-manager fund outperforms both its benchmark index and the average performance of the individual fund managers in the medium term. In active multi-management, analysis and regular review of the profiles of the individual fund managers are of crucial importance. This dynamic approach to manager selection creates additional added value compared to individual funds. It is very likely that a multi-manager fund will not achieve the same results as, for example, the best individual fund manager in the respective category, but conversely not the worst. The dispersion that results in a fund from the combination of managers with low correlation makes the investor less dependent on general market developments and fluctuating returns. The key lies in the optimal combination of asset classes, styles and, last but not least, the asset manager.

Advantages of multi-manager funds

  • Diversification of the portfolio at the investment style and manager level
  • Different investment styles usually cushion market fluctuations
  • The diversification over several managers allows more consistent returns with a lower investment risk
  • Optimization of the combination of individual fund managers
  • Observation and review of the individual fund managers through quantitative and qualitative analyzes
  • A multi-manager fund is suitable as a basic investment i. d. Usually for every investor portfolio
  • Ideal implementation of the strategic asset allocation