24th June 2010

Adviser letter of the week

Dilemma for those not keen on multi-manager funds

Investment and financial planners often ignore multi-manager funds because they do not believe they offer value for money. Where the manager is providing real value it's hard to argue against them.

Take absolute return investing as an example. The sector is a minefield - the available funds cover a multitude of different strategies all purporting to achieve the same thing. Unfortunately individual funds often correlate significantly with equities and each other.

A multi-manager approach can work very well in this sector. It is possible to have a globally invested, multi-asset fund with zero FTSE correlation and positive returns that are produced regardless of market direction.

Multi-managers have received a boost from HM Government in the form of increased CGT for higher rate tax payers. How so?

There are many investment portfolios that are not held in a tax efficient wrapper for any number of reasons - ease of access, to avoid highly personalised rules, assets held in trusts.

Going forward taxable gains may well be subjected to a higher rate of CGT. Gains are often generated to bank profits, rebalance portfolios or to reflect changed circumstances. i.e. they are tactically desirable and necessary.

So what to do? Make fewer disposals to hopefully pay less tax?

For example, you might be selecting a few different absolute return funds for client portfolios. It makes sense to invest in a range of assets and strategies - it avoids betting on the nose.

Does this make sense going forward? A well thought out multi-manager absolute return fund would provide the same benefits but with greater tax efficiency.

The net result? A happier client with an improved investment returns.

Jeremy Askew
Conduit Financial Solutions
t +44 (0) 20 3239 5868
m +44 (0) 7954 136 639

www.conduitfs.co.uk

Adviser Letter of the Week