More Funds-of-Funds Taking Defensive, Low-Cost Plays

More actively managed funds-of-funds and mutual fund wrap programs are investing in such safe, low-cost vehicles as index funds and exchange-traded funds, The Globe and Mail reports.

Manulife Mutual Funds recently launched three index funds that it will include in its Simplicity asset allocation program, the Manulife Canadian Equity Index, the Manulife U.S. Equity Index and the Manulife International Equity Index.

“We have value and growth [equity styles] because they perform differently at different times,” said Jeff Ray, assistant vice president of mutual fund products at Manulife. “We felt that adding a passive or index fund would be a good complement to those active styles.”

Likewise, AGF Funds and Invesco Trimark recently added exchange-traded funds that invest in non-correlated alternative investments to their packaged fund portfolios. In AGF’s Harmony program, the ETFs invest in real estate, infrastructure, water, oil, sands, agriculture and mining.

“It’s all about making the overall package better from a diversification perspective,” said John Ciampaglia, senior vice president of product development at Invesco Trimark. “We put PowerShares into one of our wrap programs because they offer lower fees, tax efficiency and access to specialized mandates.”

Some of the investing ideas that have been popular among institutional investors are moving into the retail investor world, Ciampaglia said. “Most of the larger pension funds have a combination of passive indexing, enhanced indexing and active management working together,” he said.