Its fund rating tool QuantRater, which assigns ratings to funds from one to five based on their consistency and performance, shows that just 13%, or 25, of its 184 multi-manager funds rated managed a rating of three, four, or five since June 2008. QuantRater looks at the past performance of funds and their information ratio over the past 69 months to identify consistent performance. The resulting quantitative analysis orders each fund with a total performance ratio.
This disappointing statistic is particularly significant given that in Defaqto’s platform users survey earlier this year, just over a quarter currently outsource to a multi-manager, with this outsourcing trend “likely to increase further as advisers review their business models during 2012.”
Defaqto’s guide to multi-managers, published today, also suggests that increasing average cash positions in multi-manager funds are up by 0.5% in 2011, indicating a sense of uncertainty and lack of confidence in the market due to the fragility of the global economy.
Fraser Donaldson, Insight Analyst for Funds at Defaqto, said: "With nine months to go until the new distribution landscape as mapped by the retail distribution review unfolds, the multi-manager industry continues to grow as advisers use these funds as a partial outsourcing of their investment process for clients looking for a simple managed solution.
He adds: "For those advisers that buy into multi-manager investing as an outsourcing solution, there is a wide range of processes that can be adopted. However, what is important for advisers to remember is whichever methodology they choose to follow, investment responsibility cannot be negated completely. There are still hundreds of multi-manager funds to choose from and it is here, in the selection process, that due diligence still needs to be carried out.”