A multi-advisor fund is a type of investment strategy that is managed by two or more administrators or managers, rather than a single advisor taking on the entire responsibility for the fund. Typically, this approach is helpful when it comes to diversifying the holdings contained in the fund, with each of the advisors or managers bringing their own expertise with specific types of options to the task. In addition, the ability to draw on the collective knowledge and perceptions of two or more managers can often make the tasks of choosing and managing investments more lucrative for everyone involved.
With a multi-advisor fund, it is not unusual to have several managers who each specialize in different types of investment options. This can bring a level of diversification to the fund, since each of the managers can provide expert opinions on each of the different assets considered for inclusion. In addition, the potential for each of the managers to bring up questions or concerns about the long-term viability of different options can often lead to selling off assets that are likely to depreciate in the near future and replace them with other assets that will help the multi-advisor fund hold its value through a projected downward turn in the economy.
While there are a number of benefits associated with a multi-advisor fund, there are also potential drawbacks that investors should consider. These include questions about the ability of the advisors to work together for the good of the fund. For example, if there is intense disagreement about what to buy, hold, and sell, this could create inertia that ultimately leads to nothing being accomplished. When this is the case, there is always the chance that investors see the investment decrease due to missed opportunities that occurred during the deadlock.
Before choosing to invest in a multi-advisor fund, investors should look closely at the fund’s past performance, the stability of the assets that are currently held in the fund, and the credentials of the advisors or managers who will oversee the function of that fund. The purpose behind the scrutiny is to understand how the fund has performed in different economic climates in years past, and how the advisors responded to those economic shifts as they occurred. Should some aspect of the multi-advisor fund, such as the history or some aspect of one of the managers seem to not be a good fit for the financial goals of the investor, considering alternative investments may be a good idea.
