Fund-of-funds find favour with investors
THEfund-of-funds sector received one out of every seven dollars injected into the world’s managed fund industry during 2002, an all-time high, according to research group Cerulli Associates.
Equating to nearly 15 per cent of global managed fund inflows, Cerulli says the sector’s popularity created a stabilising force in many fund marketplaces, recording $15 billion in net new inflows.
Worldwide, fund-of-funds held US$235 billion by the end of 2002, down from US$254 billion in 2001, with an estimated loss of 17 per cent of assets due to market depreciation.
Despite the decline, the figures still represented a three-year annualised growth rate of 16 per cent, in contrast to the global fund industry shrinking three per cent per year during the same period.
Retail manager-of-managers funds also exhibited robust growth in 2002, expanding more than 10 per cent in non-US markets from US$36 billion in 2001 to US$40 billion in 2002.
The research house says these funds appear to be performing better than other multi-manager products and services, including fund-of-funds, only losing 10 per cent of assets from performance during 2002.
In Europe, fund-of-funds are being used to deliver cost-effective advice to the mass retail segment, representing easily comprehensible, easy to sell balanced portfolios for a range of risk profiles.
In more affluent market segments, fund-of-funds have been used in lieu of true open architecture to answer demand for ‘best of breed’ third party management and to deliver certain tax advantages.
Cerulli believes that embedded advice, affordable diversification, and access to foreign investments will ensure the continued success of multi-manager products.
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