UK multimanagers concerned over pace of fund launches

A spike in the number of fund launches in the last quarter of 2011 has caused Thames River Multi-Capital managers Gary Potter and Rob Burdett to express concern over the impact on a UK market already struggling to support more than 2,000 retail products.

Thames River Multi-Capital’s latest quarterly FundWatch survey shows the number of fund launches in Q4 2011 was 32, up from nine in Q3 – or a 256% proportional jump in the number of launches.

The new funds were spread across UK Investment Management Asociation (IMA) sectors, including four in the IMA Mixed Investment 20-60% Shares sector and the IMA Mixed Investment 40-85% Shares sector. Just one new fund joined the IMA Mixed Investment 0-35% Shares sector.

Gary Potter, co-head of Thames River Multi-Capital said: “UK investors are spoilt for choice when it comes to investment products with over 2000 to choose from, so the increase in the number of funds launched is of some concern – particularly when you consider the challenging market conditions investors are faced with. Less is sometimes more, and over time we expect to see a period of consolidation of funds, with underperforming or small funds being closed or merged.”

The FundWatch survey also issues a Consistency Ratio finding, which measures the proportion of funds achieving consistent above average performance in 12 IMA sectors.

Over three years to the first quarter of 2012, there were 175 out of 1,223 funds, or 14.3% providing above median returns. The ratio was 11.1% over the period to the last quarter of 2011.

Rob Burdett, co-head of Thames River Multi-Capital said: “Given the three years surveyed has seen stock markets recovering from their lows of early March 2009, the increase in the number of funds consistently generating above peer group returns comes as no surprise. We hope this trend will continue into the next quarter, but with challenging market conditions likely to remain the need for a well diversified portfolio remains.”

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