UK - Fund managers are predicting a resurgence in balanced mandates - despite the huge growth in specialist management and multi-managers.
Newton Investment Management director Simon Wombwell believes balanced managers will enjoy a surge in popularity due to the continuing shift from final salary to money purchase provision and individuals’ reluctance to make investment decisions.
Wombwell said: “As we see the shift from DB to DC, you will see – for these schemes – a higher proportion in balanced or managed funds.
“Rather than an individual making a choice on individual markets or asset classes, allowing the fund manager to do that, within a given objective and benchmark, is a sensible thing to do.”
Tilney Investment Management investment manager Graeme Exton agreed.
He said: “The asset allocation decision is always one of the most difficult to take, and a lot of people, the smaller DB and DC schemes, may want to go into a balanced profile, rather than feel under pressure to take decisions for which they feel they really don’t have the expertise.”
Large traditional balanced managers have struggled since the technology bubble burst and clients deserted them in favour of specialist firms.
At the same time, balanced managers have also been hit by the growth in the multi–manager market, which is currently worth US$5bn (£3.1bn) in the UK alone.
But MLIM head of institutional marketing Andrew Dyson said: “There is a good argument for genuinely diversified, multi-asset management being brought back, with asset allocation across different asset classes, rather than this continued fragmentation.
“The problem with the fragmentation of mandates is that it takes investment managers further away from what their clients are trying to achieve, which is, for example, to beat gilts by 3% or the retail price index by 5%.”
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