Multimanager Product Boom

Assets in multimanager products grew 30 percent, to $960 billion, in 2004, according to a new report from Cerulli Associates, a Boston-based research firm. The growth in the multimanager segment which includes long-only traditional investments (no private equity or hedge funds) was propelled by manager-of-manager (MOM) products, which grew 32 percent, with $50 billion in net new flows during 2004,

Assets in multimanager products grew 30 percent, to $960 billion, in 2004, according to a new report from Cerulli Associates, a Boston-based research firm.

The growth in the multimanager segment — which includes long-only traditional investments (no private equity or hedge funds) — was propelled by manager-of-manager (MOM) products, which grew 32 percent, with $50 billion in net new flows during 2004, and funds of funds (FOF) products that grew 28 percent, with $90 billion in net new business.

Global Multimanager Assets Under Management
(dollars in billions)
2001 +/- 2002 +/- 2003 +/- 2004
Retail MOM $172 (0%) 172 (47%) $254 (31%) $331
Institutional MOM $114 (-9) 103 (13) $117 (38) $160
FOF $298 (-7) 277 (33) $367 (28) $469

In the report, the term “funds of funds” refers to publicly offered funds that invest in other publicly offered funds. (Most FOF assets come from lifecycle funds offered through U.S. 401(k) plans, according to Cerulli). “Manager-of-manager” products refer to vehicles managed by multiple underlying subadvisors administering their portfolios as separate accounts.

Cerulli expects MOM vehicles to lead FOFs in growth in the future because of lower costs and less scrutiny by regulators of fees. As a whole, Cerulli expects multimanager vehicles to continue their four-year compound annual growth rate of 16 percent until 2009, reaching nearly $2 trillion in assets by that time.

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