You may often hear the ‘fact’ that there are more funds in the world than there are shares for them to invest in.
The fund management industry does certainly love finding new ways to sell the same thing.
Funds of funds have been around for many years now and essentially they try to do the job of someone picking funds for you. The manager of a fund of funds, or multi manager funds, simply invests in other funds.
A collective investment fund, such as a Unit Trust, OEIC, Investment Trust or ETF basically collects money from people like you and me, pools it into one fund and then invests into shares, fixed interest stocks, property, commodities etc. Depending on what the aim of the fund is.
What a fund of funds does is invest in only other people’s funds. Why would they do that? Well, they think there are more than enough funds out there for them to be able to pick and choose the good ones.
Obviously this is not done willy nilly. Fund managers of these types of funds will pick different fund managers based on their investment style. They will choose different fund focuses based on what they invest in. This is all designed to complement each of the holdings within the fund of funds so that there is a nice mix of funds that will eventually grow over time.
The issue many investors and advisors have with these funds though is their costs. When you have a fund investing in other funds you are paying for two levels of costs, at least. The fund of funds will charge for picking funds, and the funds it invests in will charge for picking shares, doing research etc.
If you then add to that the cost of your financial advisor, suddenly there seem to be way too many hands in the till. The till being your investment by the way!
Among the most popular of these types of multi manager funds are the Jupiter Merlin range of funds – Income, Balanced, Growth and Worldwide. However with annual charges on these funds as high as 2.57% you need to do pretty well just to get more than you would in the bank.
Investor Profile believes in investing in the markets with as little cost as possible. That gives you the best chance of making more money. It’s pretty simple maths really.