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Fund managers are designed to make an investor's life easier by packaging together teams of specialist investment managers into a single fund. They give the investor exposure to a range of expertise and styles that would be difficult (if not impossible) to replicate by themselves, as well as the expert oversight of the Multi-manager firm itself. In that sense they are a true investment one-stop-shop. Some fund managers run active funds which aim to beat the market index by picking the best performing shares. Others run passive funds, which aim to match the performance of an index by tracking it. The management fees charged by active funds are higher than for passive funds because the fund manager has to do more work.
Fund of Funds
Fund of funds are investment funds that are built using other investment funds as the building blocks. Relatively easy to establish, they have proven increasingly popular in the UK and Europe over the past few years. Fund of funds can be either 'fettered' or 'unfettered'. Fettered refers to a fund that only invests in trusts or OEICs run by the same management group as the fund. Unfettered relates to a fund of funds that is not obligated to invest solely in internal funds. As the Multi-manager concept is based on diversity, fettered fund of funds are not included in the Multi-manager universe.
Manager of Managers
The second type of Multi-manager fund is termed the manager of managers fund. In this format, rather than buying funds, manager of managers funds appoint the underlying fund managers directly. This means that the role of the manager of managers is different, since they are responsible not just for identifying competitive managers, but for monitoring the overall portfolios at a stock-by-stock, manager-by-manager level. In addition to the essential selection, monitoring and reporting processes, manager of managers should also have a comprehensive manager-replacement procedure. This ensures that if it becomes necessary to replace an existing investment manager, the change is recognised and performed quickly so as not to greatly affect the fund's performance.
Fund Supermarkets
This investment offering is sometimes confused with the Multi-manager concept. Fund supermarkets offer investors access to individual funds run by a range of investment managers. In this case the decision of which funds to buy is left to the investor. So whilst each investor may have their money managed by a range of investment managers, and the investor will have holdings in multiple funds within a single product, i.e. an ISA (Individual Savings Accounts), but not a single Multi-manager fund.
Fund switching
The movement of assets in one mutual fund or unit trust to another within a range of funds with differing objectives, all managed by the same investment company.
Fund value
The monetary value of a fund, calculated by adding up the value of its underlying assets.
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