The Power of Multi-Management- Turning Consistency into Leadership

No investment style or philosophy works all the time, so relying on one investment manager’s skill is like putting all your eggs in one basket. While some investors are comfortable taking this risk, we believe that partnering with the right multi-manager is a safer bet. This is because exceptional multi-managers tend to deliver more consistent risk-adjusted returns over the long term.

Let’s look at our flagship Fund of Fund (FoF) in the ASISA Multi-Asset Low Equity category, the PPS Conservative FoF, as an example. Since its inception in January 2013, the PPS Conservative FoF has been the most consistent fund in the category when it comes to delivering high risk-adjusted returns, relative to the ASISA category average.

We measure risk-adjusted performance using a fund’s rolling 3-year information ratio (IR) relative to its ASISA category average, where IR is computed by dividing excess return by tracking error. In simple terms, this measures how much extra return is generated for each unit of active risk, compared to a benchmark.

On a rolling 3-year IR basis, the PPS Conservative FoF has been in the “top half” in its ASISA category for a remarkable 90% of the time. No other fund in the category, with such a long track record (for their primary share class), has been more consistent in delivering high risk-adjusted returns.

PPS Conservative FoF is in a league of its own. The graphic below shows it plotting furthest to the right compared to its peers in grey, where the horizontal axis plots the percentage of time that funds in the category delivered “top half” risk adjusted performance, on a rolling 3-year basis.

Furthermore, as the vertical axis shows, excess returns versus the category have also been outstanding, highlighting that compelling risk-adjusted returns are not simply due to low tracking error.

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