Fee trends in multi-asset and multi-manager funds

23 June 2016

Patrick Norwood, Insight Analyst (Funds)

As discussed in our recent article on trends in the Risk Targeted market, manager ongoing charges (OCFs) have been falling over the recent past as advisers and investors have continued to become more focused on costs.

The same has been true across our Return Focused universe. When doing our Diamond Ratings for these types of fund, in order to compare like for like, we split the universe firstly into multi-asset and multi-manager (in the case of a multi-asset fund, one fund management firm invests directly across different asset classes; whereas with a multi-manager fund the fund manager selects a different fund or manager for each different asset class) and then by the four Investment Association (IA) ‘Mixed Asset’ sectors:

  • Mixed Investment 0-35% Shares
  • Mixed Investment 20-60% Shares
  • Mixed Investment 40-85% Shares
  • Flexible Investment

When we carried out our 2014 Diamond Ratings, the average (weighted by number of funds in each sector) ongoing charge (OCF) for multi-asset funds was 1.34% while the average multi-manager OCF in 2014 was 1.73%

When we updated our Diamond Ratings for this year, the average multi-asset and multi-manager OCFs were 1.18% and 1.49% respectively - falls of 16 and 24 basis points.

2014 OCF

Mixed 0-35%

Mixed 20-60%

Mixed 40-85%

Flexible

Average

Multi-asset

1.11%

1.33%

1.35%

1.45%

1.34%

Multi-manager

1.53%

1.78%

1.71%

1.75%

1.73%

2016 OCF

 

 

 

 

 

Multi-asset

1.09%

1.07%

1.16%

1.31%

1.18%

Multi-manager

1.31%

1.43%

1.57%

1.54%

1.49%

Source: Defaqto/Morningstar

The above table shows the numbers broken down by IA sector. As expected, charges generally increase with increasing amount of equities permitted in the portfolio. Also, multi-managers are more expensive than multi-asset funds on average as this approach usually employs external fund managers, introducing an extra layer of fees.

 

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