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More Funds Rely on Outside Managers

By Staff Writer

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May 23, 2002 — Mutual fund companies increasingly relied on outside managers to run portfolios last year, a new report showed.

At year-end, 822 funds, or nearly one out of eight domestic open-end funds, was overseen by outside managers, or so-called sub-advisors, according to a study by Financial Research Corp., a financial services consulting company.

The report found that 100 funds run by outside managers were launched last year, including 21 that were run by more than one investment adviser working under contract to a fund complex. Products with multiple managers accounted for nearly 50% of net sales among the new offerings, Boston-based FRC said.

Funds utilizing multiple outside managers were introduced by Amer Express (AXP), AXA, Prudential Investments, and SunAmerica, among other firms last year, FRC noted.

Instead of developing new funds or adding other companies’ offerings to their lineups, fund companies are “increasingly turning to sub-advisors to develop, expand or enhance” their product lines, the study’s author, John Benvenuto, said in a statement.

Benvenuto has previously noted that contracting out for managers enables fund companies to hire top talent for less money.