A multi-manager fund is a single portfolio comprising of multiple professionally-managed funds. These are sometimes referred to as a ‘fund of funds’. Rather than investing directly in shares, cash or fixed interest, the fund invests in a selection of other managed funds. These funds are usually managed by several different fund managers. Depending on the investment objective, the funds may focus on one asset class or several.
One of the key benefits of a multi-manager fund is the extra level of diversification it can provide. Investors gain access to all the usual benefits of a managed fund, such as company diversification and management expertise, with the added layer of diversification by fund manager. This is important because rarely will all fund managers perform equally in all market conditions. By diversifying across fund managers, exposure to the performance of a single fund manager is reduced.