How we manage our multi-manager funds
Some insights from Sheridan Admans, one of our Investment Managers about the ongoing decisions made in our fund range.
We look after three multi-manager funds and although each fund has their differences, there are some key considerations that hold true across the board.
We attempt to control risk by asset diversification, sector diversification, underlying management group diversification, a core of high profile liquid funds and a satellite of boutique managers that may have a concentration of institutional investors. We also continually monitor potential threats, which might trigger an adverse event in a particular asset class.
Asset allocation & regions
Of course it’s not just about selecting funds with top quality managers. A fund might have the best manager in a region, but if the region underperforms, it’s likely to have an impact on how much a manager can return.
By identifying the regions we believe exhibit better value, we work on which sectors we believe fit the economic phase we are entering, with an eye always on sector valuations. We apply this to asset types as well, by using all of that data/knowledge to identify the managers we believe have the edge over their peers in all permutations. We then blend them into our portfolio to give investors the best outcome based on our outlook.
Our valuation outlook is supported by extensive modelling on forward looking economic inputs and valuation metrics.
We spend a significant amount of time looking for and understanding inflation risk, volatility risk, capital risk and diversification risk, which can all have a detrimental impact on investment performance if not appropriately managed. Our aim is to balance the funds appropriately, to protect or take advantage of the opportunities market conditions may present. Historically, we have delivered good performance on volatility levels, below that of the sector average.
Our three multi-manager funds provide investors with an opportunity to spread risk cost-effectively by buying into a wide variety of investments. They cater for three different investment objectives with varying degrees of risk: cautious, balanced and adventurous.
TC Share Centre Multi-Manager funds were launched into the financial crisis in 2008. Performance has weathered most of what the markets have thrown at them, given the bouts of significant market volatility. This has primarily come down to our attention to downside risk, preserving capital, having good access to fund managers and focussing on quality funds. We have also taken advantage of opportunities and remain steadfast when the short-term blurs longer-term expectations.
The funds’ assets are managed on a medium to long-term perspective, which we believe reduces the ever increasing effect of market noise and should help them outperform more short-term momentum-orientated managers over the long term. This may mean that the funds underperform their sector peers in some years, as the managers prefer not to chase markets, but instead look for assets or sectors which they believe are undervalued and have strong potential for a re-rating. Therefore, it is unlikely the portfolios will experience a high turnover and equally, we seek funds to invest in that also have lower than average turnover compared to sector peers.
Researching and managing the funds
We take a quantitative and qualitative approach that aims to break down research from various external sources and internal rationalisation. This allows us to formulate ideas on market influences and how fund portfolios might react in different situations. This involves:
- Scrutinising data and challenging fund managers on an ongoing basis to ensure our understanding of their process, compliance to stated objectives and that their view of the asset class or region is in line with ours. If it is moving apart, what are the drivers?
- An understanding of what conditions and economic backdrop the fund will likely perform in.
- Deciding which collective structure is most suitable and which funds will best serve the objectives of the portfolio.
All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.