Fettered or Unfettered?

Tuesday, 8th March 2011 18:34 - by Resident IFA

The results of a new study published today showed that 'Fettered' investment funds out-performed 'Unfettered' funds over 3 & 5 year timeframes. The source of this information is Trustnet. An Unfettered investment fund is unconstrained in that it is allowed to invest in funds from other managers, whereas a Fettered fund can only draw on the available in-house funds range. So, it is a case of ‘Multi-manager’ versus ‘Fund-of-Funds’ in this scenario. The bald figures show that, in the IMA Active Managed sector, Fettered funds returned 8.1% more over 5 years, and 6.8% over 3 years. Fettered funds usually cost less in management charges – around 0.55% per annum – but this cannot be the sole reason for their superior returns over their Unfettered counterparts. One other potential explanation is the immediate access to (pertinent) information/direct relationship that a Fettered fund management team will have...walking along a corridor to see the fund managers within their portfolio. This, and the relative lack of investment scope, may well be better for them and actually allow for greater focus. This said, the very best funds are likely to be of the Unfettered variety; possessing more investment flexibility and able to tap a wider number of underlying investment management styles, strategy, and expertise. This is borne out by the fact that 2 of the top funds in the IMA Active Managed sector are Unfettered – Margetts Venture Strategy and Jupiter Merlin Growth Portfolio (Source: Financial Express). Perhaps the best approach to this investment sector is a combination of both Fettered and Unfettered? Until next time...