Standard & Poor's (S&P) peer-group review of the Australian equity multi-manager sector found it has failed to meet its investment objectives over an extended period of time.
"Pretty much no fund had met their investment objectives over three, five, seven or 10 years, and the majority did not meet benchmark over those periods," S&P head of research Leanne Milton said.
The reason for the disappointing performance of the sector could not be narrowed down to one element, with most managers facing unique challenges of their own.
"For each manager there was a different reason for the result. Some managers had capacity constraints, so perhaps their ability to respond to markets was not as nimble as others," she said.
"Fees were an issue, as was the ability to blend managers, poor fund manager selection, and implementation."
The review examined four managers offering seven strategies. The research house wanted to see multi-managers who transitioned underlying managers efficiently, monitored their incumbent manager line up, identified strong alpha generating strategies, and invested early with promising managers.
Over the seven strategies, the review saw a three star rating as the highest (out of a possible five), with three funds maintaining their rating, two new funds rated for the first time, and two funds downgraded.
The best ratings went to the Russell Australian-share and Australian-opportunities funds, the MLC growth and value style strategies, and the Custom Choice Australian share fund.
The Australian share strategies of Advance and MLC both received a two star rating.
