| Style diversification without the strings attached |
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| 27/06/2004 | |
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The result might be roughly the same, but implementation modalities vary between a "manager of managers" approach and holdings in fund of funds. Both allow for a great deal of style diversification, but are not equally demanding on the investor's resources. While the underlying funds selection for a fund of funds is performed by an asset manager specialised in the field, it is the investor himself that has to run the selection process if it chooses to have a portfolio management approach to external management. This approach has been chosen by AP3, the Swedish buffer pension fund set up in 2001, whose ambition is to become a leading "manager of managers". As explained by Pernilla Klein, the spokesperson for the fund, AP3 has adopted a manager of managers approach instead of simply investing in fund of funds both for mean and end reasons. She says: "We can do it ourselves because we have enough in-house resources." While the manager of managers approach allows AP3 to retain full control over its portfolio optimisation process, the selection of fund of funds would not since the fund picker actually does half of the job – selecting the funds included in the umbrella fund. In other words, as a manager of managers, AP3 has become its own fund of funds manager, instead of outsourcing it to a specialised multi-manager. "Our board defines the modalities of our portfolio optimisation and we then apply it ourselves", says Klein. As such, at any point in time, the Swedish pension scheme has the possibility to fire and hire managers depending on their performance or other factors – without leaving behind the whole range of mandates within one asset class, making large gains in terms of flexibility. "We do not want to be tied to a product", says Klein. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |
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Articles of the same Topic : Portfolio management |
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