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Multi-Manager Approach Gains Favor


Although several fund companies are making the claims, there appears to be no evidence to support the contention that multi-manager funds perform better on balance than funds with only one manager.

The popularity of using multi-managers has grown in the last three to four years and in just the last few months, several companies have announced that their recent track records substantiate their contentions that multi-managed funds can be expected to out-perform others.

Among funds making such claims are Phoenix Investment Partners and American Skandia.

But, there is no evidence to support the notion that the multi-manager approach translates into better performance, says Amy Arnott, editor of Morningstar Mutual Funds.

"I don't think that there's really any evidence that those that have sub-advisers perform better than those that don't," Arnott said.

Many companies will use the approach to shore up an asset class for which they may not have a strong reputation or capabilities, she said. However, the use of sub-advisers also drives up costs since the adviser and sub-adviser both charge fees, Arnott said.

Nevertheless, Phoenix Investment Partners, for instance, says that its funds are performing better due to the multi-manager approach. American Skandia Advisor Funds is claiming that the success of its new fund family - it says that it reached $1 billion in assets in 18 months - is largely due to the selection it offers through the multi-managed model. American Skandia , which had been known for its variable annuities but which started its fund family only in 1997, uses 13 different money managers, among them Janus, T. Rowe Price and America Century.

Several other fund companies, especially those that are buying money managers, use the approach as well, including United Asset Management, Liberty Funds Distributors and the New England Funds.

Officials at Phoenix Investment Partners say that the multi-manager approach helps its funds out-perform the S&P 500 index. Phoenix recently announced that 40 percent of its retail funds beat the S&P 500 in 1998, the first full year that it has employed its multi-manager strategy.

Phoenix has seven money management subsidiaries but has centralized its distribution and administration. Company officials say this allows its subsidiaries to concentrate on managing money instead of worrying about other tasks like marketing and gathering assets.

"Our model is based on the principle that money managers who focus on managing assets and not on the operational details of running a fund business, will generate stronger, more consistent investment performance," Philip R. McLoughlin, chairman and ceo of Phoenix, said in a statement.

Phoenix created its multi-manager approach through a series of acquisitions it has made since it went public in 1995 under the Phoenix Duff & Phelps Corp. name. Phoenix Duff & Phelps Corp. arose from the merger of Phoenix Securities Group of Hartford and Duff & Phelps Corp. In 1997, Phoenix acquired Roger Engemann & Associates of Pasadena, Calif., and took a stake in Seneca Capital Management of San Francisco. In May of last year, the company changed its name to Phoenix Investment Partners, which it says better conveys its multi-manager style.

Michael Murray, vice president and national sales manager for American Skandia Advisor Funds, says the multi-manager approach is popular with advisers who are seeking to get their clients into a variety of funds and asset classes.

Advisers also like it because they only have to deal with one company, and their business is consolidated even though they have access to several different money managers.