MONEY
FUNDS OF FUNDS
2
trustnetdirect.com
trustnetdirect.com
Jupiter - Merlin Income Portfolio (24.44%)
35%
Jupiter - Merlin Income July 2011 Top 10 (28.84%)
30%
25%
20%
15%
10%
5%
0%
Nov
Aug
May
Feb 15
Nov
Aug
May
Feb 14
Nov
Aug
-5%
May
than once every two years. Even
more worrying was that 14 per
cent said they rebalanced less than
once every three years.
Patrick Connolly, head of
communications at Chase de Vere,
says that whatever your opinion
FE Analytics has data on the top10 holdings of Jupiter Merlin
Income – the largest fund in one of
the highest-profile multi-manager
ranges in the industry – going back
to July 2011.
It shows there have been
substantial changes over this time,
with only four of its current top-10
present four-and-a-half years ago.
However, if you had simply
bought the top-10 holdings in July
2011 in the proportion they made
up the portfolio, then failed to
rebalance, you would have done
better than if you had simply bought
Jupiter Merlin Income.
Perhaps the sceptics might be on
to something after all...
40%
Feb 13
might think. While experts
recommend rebalancing your
portfolio once a year, a recent poll
on FE Trustnet found that more
than 22 per cent of respondents –
who are likely to be experienced
investors – said they did so less
OUT OF DATE
PERFORMANCE OF FUND VS JULY 2011 TOP-10 HOLDINGS
Nov
In the past few years as the issue
of fees has become ever more
pronounced, the amount charged
by multi-manager funds has
attracted even more attention.
Some retail investors have accused
them of taking advantage of people
who are new to the industry,
charging excessive amounts for a
service that anyone with a basic
knowledge of investing and access
to one of a number of fund ratings
should be able to conduct themself.
However, new research suggests
there may be more need for
multi-manager funds among
experienced investors than they
Aug
TAKING ADVANTAGE
However, Paul Warner, managing
director at Minerva Fund Managers,
is less sympathetic to this course of
action. He says opting for a multimanager fund because you haven’t
got around to rebalancing your
portfolio is just a sign of laziness.
“I understand the argument, but
what people should really do is
look after their own portfolios,”
he said. “Having said that, I’m
always looking after other people’s
portfolios, but in terms of looking
after mine, I can let it slide.”
“People need to be honest with
themselves about what they are
good at. If you know your portfolio
needs to be rebalanced, you should
make it your new year’s resolution.”
“However, if you know you are the
sort of person who is going to let it
slide, you should bite the bullet and
buy a multi-manager fund or go to a
discretionary fund manager.”
May
A SIGN OF LAZINESS
One argument against using a multimanager fund is that because they
are obliged to publish a list of their
top-10 holdings, you can simply buy
the same funds and save yourself
from having to pay an extra layer
of charges.
However, this is a route the
experts say is full of pitfalls.
“There is nothing wrong with
doing this, but then once again
you have to manage this portfolio
yourself, making changes where
appropriate,” Nelson explained.
“However, you will not have
access to the same first-hand
information that the fund managers
will. If you have a full-time job,
you are also unlikely to give your
portfolio the same level of attention
as the multi-managers do.”
Warner adds: “You could try to
copy the holdings of, say, a Jupiter
Merlin fund, but then you have to
Feb 12
W
hile multi-manager
funds are marketed
as a useful tool for
inexperienced investors who do
not feel confident making asset
allocation decisions themselves,
there is nothing that is more likely
to provoke the ire of the regular
commenters on the FE Trustnet
site than these products.
Their main problem with funds
of funds is the extra layer of
charges levied on the investor –
making them significantly more
expensive than normal funds.
PITFALLS
Nov
Anthony Luzio finds there may be more
need for multi-manager funds among
experienced investors than many of them
would care to admit
keep the holdings up to date all the
time. And if you can’t remember to
rebalance your own portfolio, what
hope have you got of rebalancing
what is effectively someone else’s?”
Connolly sees another issue with
this approach.
“The problem with looking at
a multi-manager fund and trying
to copy its holdings is that a lot of
them aren’t forthcoming with what
they own and they can be out of date
by the time you have seen them.”
“They can also access the funds at
a cheaper price than retail investors
and can access funds that retail
investors can’t.”
“IF YOU CAN’T REMEMBER
TO REBALANCE YOUR
OWN PORTFOLIO, WHAT
HOPE HAVE YOU GOT OF
REBALANCING WHAT IS
EFFECTIVELY SOMEONE
ELSE’S?”
Aug 11
TIME TO
ADMIT
DEFEAT?
about your own abilities, if you
don’t rebalance your portfolio every
year, this would imply that you are
not an experienced investor.
“This means that you need to
either A) go to an IFA or B) choose
a multi-manager fund,” he said,
before adding “although you need to
understand that you will be paying
more in charges than if you invested
directly in funds.”
Kerry Nelson, managing
director of Nexus IFA, agrees with
Connolly. “A lot of people set up
well diversified portfolios with all
the bes t intentions, but then never
touch them again,” she said.
“This can be a problem as things
can quickly change dramatically,
especially in this environment. You
could lose all the gains a particular
fund has made over a number of
years, for example.”
“You also have to strike a balance
between reviewing your portfolio
too much or not enough. You
should consider multi-manager
funds if you haven’t got the
inclination or the time – because
of this internet thing, we pressure
ourselves to make the big decisions,
but then never get around to them.”
Source: FE Analytics
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