Happy 15th Birthday, Investment Week! My how time flies… By coincidence it is also 15 years since we founded our multi-manager team at Rothschild.
What has changed in our corner of the asset management industry during IW’s life? And what do the next 15 years hold?
Back in 1995, there were only a handful of serious multi-manager businesses – Rothschild, Henderson and Portfolio. Today, Lipper tracks over 80 providers. I think it is fair to say multi-manager funds are now the staple diet for many IFAs – indeed, the last eight quarters spanning the credit crunch have all seen good positive multi-manager inflows, and current asset levels are at an all-time peak.
And there is good reason for this as the multi-manager structure and philosophy allows such funds to move with the times more easily than most. In terms of the products offered, the taxation changes and growing importance of Isas have favoured the all-in-one portfolio solution multi-managers can offer – asset allocation services have faded away.
Over this time, a succession of regulatory changes have opened a Pandora’s box of investment choices for the multi-manager. This is a mixed blessing, and multi-managers have had to be careful to only embrace opportunities where they can genuinely transfer their skills and experience.
What else has changed? Our research methods have remained resolutely based in face-to-face meetings, but the background research to these meetings has become increasingly tech-heavy. Additionally, the level of supporting research done to allow for market and asset class decisions has become increasingly comprehensive.
We were virtually unique in using Style Research portfolio analysis software in the 1990s, but now such systems are de-rigueur for the modern multi-manager. The systems themselves have come a long way too.
Have multi-manager funds delivered? Taking IMA (or AUTIF as it was until 2002) website data for the average balanced fund as a proxy, £1,000 has become £2,308 over 15 years while cash has delivered £1,320*. The future, in our opinion, will be rosier still for investors.
In the wider investment industry, those 15 years have witnessed the rise of the boutique, as well as the cult of the individual fund manager. Brand is less important these days with some – Woodford and Bolton – becoming household names. It is usually cheaper to buy a name than to buy a business.
What does the next 15 years hold?
For the investment companies we invest with, we would expect a continuation of the separation of distribution and manufacturing as pioneered by Citigroup’s disposal of its fund management business. We would also predict all major life companies will be offering multi-manager products either having hired teams, or through outsourcing arrangements.
Will there be over 80 multi-manager providers 15 years from now? No – but we would expect overall assets to continue to grow apace as the biggest distributors continue to move into the space. As for performance? We think the boutique multi-managers will deliver the goods.
Robert Burdett, Thames River Capital LLP
* Source IMA website, data to end Q3 2009.
