Assets in multimanager products-a segment that includes both funds of funds and manager-of-managers vehicles-expanded by 30% during 2004 to exceed US$960 billion, according to the most recent Cerulli Quantitative Update, Global Multimanager Products 2005.
Expansion in manager-of-managers products continued to outflank the growth of funds of funds, as regulators worldwide continue to frown over the latter product, and assemblers continue to shift their emphasis toward awarding separate accounts to subadvisors. Manager-of-managers products grew 32% during 2004, compared to the 28% expansion of funds of funds, with most of the activity in the latter segment coming from U.S. lifecycle funds.
Several catalysts, including the increasing demand for embedded-advice products, as well as the increasing split between manufacturing and distribution functions in fund management, are fueling the growth of assembled investment products. Manager-of-managers products alone garnered US$50 billion in net new inflow, and funds of funds-even excluding funds of hedge funds, untracked in this study-received nearly US$90 billion in net new business. Cerulli expects that multimanager vehicles will maintain their historical four-year compound annual growth rate of 16% until 2009, with multimanager products worldwide doubling in size to nearly US$2 trillion before the end of the decade.