FUNDS of funds saw record inflows last year as financial advisers increasingly threw in the towel and decided to outsource portfolio management decisions to third parties.
Around £3.9bn in net retail money went into funds of funds during 2009, according to statistics from the Investment Management Association, with £1bn entering in the fourth quarter alone. In contrast, passive index-trackers lost £14.4m in the three months to the end of December.
The figures suggest independent financial advisers (IFAs) were shaken after the savage downturn in
2008 and the unexpected boom that followed, prompting them to delegate fund selection to experts.
Gavin Haynes of Bristol-based advisory firm Whitechurch Securities said: “A lot of intermediaries have realised it’s not as simple as buying last year’s best performer and watching it carry on being the best. It you haven’t got the expertise, resources or drive to be a portfolio manager it makes sense to outsource these things.”
Haynes remarked that the burgeoning popularity of multi-asset funds meant asset allocation choices were now being passed to specialists as well as fund selection duties.
Overall, assets invested in retail funds rose from £361.7bn in 2008 to £480.8bn. Ethical funds accounted for £5.6bn of the money, their highest level on record.
IMA chief executive Richard Saunders told City A.M.: “Funds of funds provide another distribution channel for funds, along with supermarkets and life platforms, so it’s an opportunity for active managers.”