According to Cerulli Associates’ The International Multimanager Marketplace, multimanager assets under management totaled $489 billion at year-end 2001, representing a compound annual growth rate of about 15% since 1999.
Recent multimanager growth has come from outside the US. Continental Europe will be the engine of future expansion, the researchers said.
Multimanager growth was a stark contrast to worldwide mutual fund assets, which were flat during the same period, Cerulli said.
According to Cerulli, multimanager products can offer the following benefits for clients:
- lower risk through diversification of managers, styles, and asset classes
- more tax-efficiency than separately managed accounts
Funds of Funds
European and other international players are introducing funds of funds as a cautious and strategically sound way of offering third-party asset management, the study noted.
Unfettered or third-party funds currently represent 17% of total fund-of-funds assets under management, and, Cerulli said the potential for unfettered strategies is strong.
There is debate regarding the relative merits of fund-of-funds approaches versus manager-of-managers strategies, according to the report.
Some argue that the former are more nimble and lend themselves to active management, while others believe the latter boast a more scientific investment process and prove more cost-effective for manufacturers and investors alike.
The Cerulli study also forecast that:
- non-US investors’ diversification into equities and foreign asset classes will continue,
- new investors in less developed markets will continue to turn to multimanager funds for embedded advice and simplicity, and
- pension reform and the development of European institutional markets will in time benefit managers of managers