Bedford, Freeman & Worth (BFW) Publishing Presented by: Sara Whittern Sr. Area Adoption Manager.
Multi-Manager is it worth the hassle?
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Transcript of Multi-Manager is it worth the hassle?
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Multi-Manageris it worth the hassle?
Peter Fitzgerald CFA
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Index
• What is Multi-Manager• The Challenges• Active v Passive• Asset Allocation v Manager Selection• Manager Selection• Blending• Costs/Benefit
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What is Multi-Manger
Overall Portfolio
Manager ZInstitution A
Manager YInstitution B
Manager XInstitution C
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Why Multi-Manger
Fund/Manager selection is not easy
Monitoring is time consuming
Blending is not straightforward
Regulatory pressuresRetail Distribution Review (RDR)
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The Challenges
Funds: 27000+
Quoted stocks: 624 in UK
Source: Morningstar & Bloomberg
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Active Management can work
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Asset Allocation v Manager Selection
90% of relative returns do not come from asset allocation
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Manager Selection:Can’t do it on the cheap
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The sources of manager selection risk
Risk Exposure Style Bias Luck Skill
Financial LeverageBeta LeverageConcentration of Returns
Growth / Value BiasSmall Cap BiasSector Bets
Manager InterviewsUnique InsightsTeam / Process
Success Going ForwardTeam Continuity
Quantitative Qualitative
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Quant/Historical PerformancePeer Group Annualised
returnCumulative return Alpha Annualised
Fund 3yr (to end of 2011) Second Quartile 17.62 62.73 0.24
Benchmark (to end of 2011) - 17.00 60.15 0.00
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Rolling alphaRolling 12 Month Alpha vs MSCI EM NR (3 yr to end of 2011)
2010 2011
12.50
10.00
7.50
5.00
2.50
0.00
-2.50
-5.00
Investment Name
Source: Morningstar Direct
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Quant/Historical Performance
Fund 3 yr (to end of Sep 12)
Third Quartile 3.56 11.07 (1.86)
Benchmark (to end of Sep 12)
- 5.30 16.75 0.00
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Rolling AlphaRolling 12 Month Alpha vs MSCI EM NR (3 yr to end of Sep 12)
2010 2011 2012
0.75
0.00
-0.75
-1.50
-2.25
-3.00
-3.75
-4.50
Investment Name
Source: Morningstar Direct
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Manager Selection
• Robust framework for:– Selecting– Monitoring– Replacing
The 6Ps
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Blending Mangers
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Blending Mangers
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Traditional Blending
Small Cap Growth
Large Cap Growth Large Cap Value
Small Cap Value
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Alternative Blending
LT stock picking stock trading
LT macro rotation
Turnover
Allocation Effect / Selection Effect
100% 150% 200%50%
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Cost/Benefit
0.25
0.250.6
0.1
Costs
Manager SelectionAsset AllocationUnderlying ManagerOther
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Some Examples
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