Why Pursue a Manager of Managers Approach?
No one money manager has a monopoly on the best investment ideas.
In our experience, every money manager has strong years…and not-so-strong years. It's impossible to predict which year will be which.
For this reason, we maintain a disciplined, long-term perspective, calling on a number of proven institutional money managers (known as sub-advisors) on behalf of our investors.
As a manager of managers, our goal is to engage the most effective money managers for each asset class, investment style or market strategy — whether that can be done through a single sub-advisor or through a combination of sub-advisors.
When multiple managers are deemed more beneficial for a given strategy, each becomes responsible for a portion of the combined assets and for investing that portion directly in the securities that best suit the investment objectives of the portfolio.
The American Beacon approach is unlike a fund-of-funds strategy or a portfolio-of-funds strategy. Those strategies both involve investing in other investment funds, rather than individual securities. As the following chart illustrates, the differences can be striking.
| SERVICE CONSIDERATION |
MANAGER OF MANAGERS |
FUND OF FUNDS |
PORTFOLIO OF FUNDS |
| Manager Diversification – splits assets among a combination of investment managers |
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| Capacity – ability to fully invest additional monies from investors in desired investment style |
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| Selection & Monitoring of Managers – detailed review of investment managers before and after hire to ensure quality
and consistency of performance |
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| Auto Rebalance – allocate portfolio monies automatically as
markets rotate |
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| One Statement – consolidated reporting from one source to
investors for statements and tax reporting |
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| Verifiable Historical Track Record – the performance of multiple
sub-advisors is integrated to create a single, aggregated track
record for the entire fund portfolio over time |
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| Ability to Negotiate Fees – advisor may negotiate fees directly
with each manager versus “off the shelf” pricing |
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| Set Portfolio Guidelines – advisor determines permissible
investments to adhere to fund objectives |
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| No Liquidation if Manager is Terminated – assets may be
transferred to another investment manager without incurring
transaction costs or market losses due to a liquidation |
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| Access to Non-Mutual Fund Managers – many industry-leading
investment managers specialize in separate account active
management with high minimums |
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| Economies of Scale with Service Providers – managing large
assets with an established infrastructure provides cost savings
as fees are negotiated and assets grow |
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| Mask Trading – individual investment manager’s trading activity is aggregated, obscuring the manager’s intent and preventing others from affecting the price of the traded security by buying or selling the same security at the same time |
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| Real-Time Portfolio Information – underlying investments are transparent to provide portfolio managers with access to an
accurate picture of portfolio holdings on a real-time basis |
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* Actual characteristics depend upon the proprietary structure of the product.
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