UK - Multi-manager funds will become one of the standard investment options DC schemes offer members, Threadneedle Investments predicts.
Head of DC pensions Emma Douglas said one of the advantages of multi-manager was that it removed responsibility for making investment decisions from trustees and members and handed them to investment experts.
This, she said, made the multi-manager accountable for performance. And Douglas pointed out that if it became necessary to replace an underperforming fund manager, changes could be made “behind the scenes” and there are no issues with legacy fund options.
Douglas said: “Does the multi-manager approach offer all the benefits of active management, without the downsides? Yes, but as with any investment option, only if it delivers what it has set out to do.
“One of the dangers of a multi-manager approach is that by mixing the underlying managers the multi-manager ends up delivering index-tracking performance but at high-end active fees.
“However, over time it is likely that more DC schemes will choose this style option, as there are clear advantages to this approach.”
PSolve principal Gavin Orpin said another benefit of multi-manager funds within DC platforms was that they offered access to specialist equity and bond managers that were otherwise unavailable to them.
However he added: “Trustees need to monitor multi-managers in the same way as single fund providers as they have the same capacity to perform well or underperform.”
But according to Invesco head of corporate affairs David Butcher, debating the merits of multi-manager funds “misses the point”.
He argued that the primary concern for employers should be educating their workforce so that they could make appropriate investment decisions, rather than removing choice from them.
He said: “What we need to deliver is holistic financial education that enables people to make an informed choice.
“Whether that choice is between 80 funds or four funds, people still need the education. That’s the real issue, it is not the choices available.”
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