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The ideas and conclusions within these blogs are the authors' own and do not necessarily reflect the views of Octopus. They are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any investment. For our full terms and conditions, please click here.

Multi manager - managing choices

Lothar Mentel - 07 October 2010

A major feature of modern life is the extent of choice we all have. On the high street there are supermarkets and shops stacked with goods, at home we have televisions with scores of channels, and while on the move we can listen to Ipods that store thousands of songs. Furthermore, innovations and advancements in technology have changed the way we communicate, meaning many people have a greater choice about how they live and work overall. However, this level of choice hasn't yet been reflected in the investment world. Often, investors may still feel that their options are limited - either they leave their cash in the bank, where they'll be looking at a very low return, or they can invest for higher returns via the stock market but that feels too risky. Furthermore, within the stock market option, we arrive at the other extreme - an overwhelming choice of investment options further complicates matters. This is where multi manager can be useful.

Multi manager portfolios create more choice and this brings reduced risk. They offer a route to ‘diversification', a cornerstone of investment which effectively boils down to not putting all your eggs in one basket. Multi manager means ‘portfolios of funds' which actually offers diversification at every level. First, these portfolios are multi-asset, investing across the globe in many assets including both UK and international equities, fixed interest securities, bonds, gilts and cash. Secondly, they're multi-structure: they can mix actively managed funds with passively managed tracker funds, again increasing the potential range of investments. Finally, they're multi-manager, with the ability to combine the best fund managers from around the globe. These can be added and replaced to ensure only the best performers are included. By housing such a wide range of assets, managers and styles, diversification, choice and return potential are all amplified.

Of course, when it comes to the extent of choice we're all presented with, many social commentators have noted that we all have far too much choice in life, which isn't necessarily a positive. The ideal for anyone is to be able to cut through all the options presented in good time and make an informed decision. This is exactly what managers of multi manager portfolios can do for investors and their advisers - they can manage choices for them. If required, they will do this continually throughout an investor's life and the life of their investment.

Multi manager portfolios are traditionally more expensive in terms of fees and are often perceived as the preserve of the wealthy. However, there are now some offerings without any minimum investment requirement, which opens up this level of choice to everyone.

While the processes underlying multi manager are complex, the outcome is simple - this kind of investment can provide investors with the peace of mind that their money is invested in the right place, working to provide consistent returns. In our busy world, multi manager can help in giving more choices and in making decisions.

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General Information

The investments referred to on this website may not be suitable for all investors. Octopus does not provide, and nothing on this website should be construed as, investment or tax advice. Potential investors are recommended to seek specialist independent tax and financial advice before investing in any of our products. It is not intended that anything stated in this website should be construed as an offer, or invitation to treat, or inducement for you to engage in any investment activity. The information on this website relating to funds managed by Octopus is directed at United Kingdom residents only and funds referred to on this website will not be offered to non-residents.

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Investments in unquoted and AIM-quoted companies tend to carry a higher risk than investments in most securities listed on the main market of the London Stock Exchange and may be more difficult to sell. The inheritance tax relief applies to holdings in qualifying unquoted and AIM-quoted companies if they have been held for more than two years at the time of death and is based on current tax rules and regulations. Money that is withdrawn from qualifying holdings, or that has not been invested in qualifying unquoted or AIM-quoted companies for at least two years, will not generally be exempt from UK inheritance tax. We will invest in companies that we reasonably believe to be qualifying investments based on our understanding of HMRC's current interpretation of the rules and regulations, but we cannot guarantee this, nor can we guarantee that any changes in legislation will not have a retrospective effect. Please remember that tax rules and regulations are subject to change and depend on personal circumstances. The level of income from the Octopus ITS is not guaranteed.

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Investments into an EIS must be retained for a minimum of three years in order to retain the upfront income tax relief. Investments made into EIS qualifying companies, because they are in unquoted companies, are likely to be higher risk than securities listed on the main market of the London Stock Exchange. Investments in shares in unquoted companies are not readily marketable and the timing of any share sales and other such realisation cannot be predicted or controlled. A partial withdrawal of an investment in an approved EIS fund is not permitted. Tax rules and regulations are subject to change, and depend on personal circumstances. Readers of this website who intend to invest in Eureka or the Octopus EIS are reminded that such an investment may only be made on the basis of the information and other risk factors contained in the product brochure. Octopus will make investments which we reasonably believe to be EIS qualifying investments at the time of acquisition (but please be aware that we give no commitment that any such investment will remain a qualifying investment at all times thereafter). Companies in which we invest may cease to qualify. In this case, the relief available on that particular investment will be lost.

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Investments made by the Octopus ITS, because they are in unquoted companies, are classified by the FSA as higher risk than companies on the London Stock Exchange official list. An investment in the Octopus ITS is not suitable as a short-term investment and should be held for at least two years. Rates of tax, tax benefits and allowances described in the brochure are based on current legislation and HM Revenue & Customs practice. These may change from time to time and are not guaranteed. In this case, the inheritance tax relief available on the investment may be lost. Changes in law can have a retrospective effect. The Octopus Enhanced Discounted Gift Solution has been designed with UK-resident taxpayers in mind. If you are not resident or ordinarily resident in the UK for tax purposes, it may not be appropriate or advantageous for you to invest in this product. This product utilises a trust to facilitate planning. Trusts are a legal arrangement and prospective investors are advised to seek legal advice if they are unsure of their rights and obligations. The taxation of trusts can become complicated, and investors should seek tax advice from a professional adviser.

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CFIC Octopus UK Micro Cap Growth Fund

The fund will invest in securities issued by smaller companies and the market for these securities may be less liquid than the market for securities issued by larger companies. Investment in smaller companies (including companies quoted on AIM) can be higher risk than investment in larger, more established companies and as a result, the performance of the fund may be more volatile. The fund can use both ‘long' and ‘short' positions in individual stocks and markets, which may be more volatile than other investments, such as cash or bonds, and the value of the fund can therefore move independently from the general direction of the stock markets, rising as markets fall but theoretically it can also fall as markets rise. Octopus uses a risk management process to oversee and manage derivative exposure within the fund. The investments made by the fund may not always be readily realisable and their marketability may be restricted. As the fund may invest in a comparatively small number of companies, it may be more volatile than funds that are more diversified. Before investing, please ensure that you have read the information set out in the simplified prospectus, which includes full details of the charges. The authorised corporate Director is City Financial Investment Company Limited.

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