What Is Manager of Managers (MoM)?
A manager of managers (MoM) approach is a type of oversight investment strategy whereby a manager chooses managers for an investment program and regularly monitors their performance.
Understanding Manager of Managers (MoM)
A manager of managers approach is typically used within institutional investment programs. It differs from a fund of funds strategy since it involves comprehensive investment programs and not individual investment fund products.
Institutional program managers may be responsible for managing assets for a range of different purposes. Pension funds and retirement plans are some of the most common programs. Generally, most institutional clients will deploy a manager of managers strategy. Institutional manager of managers investment programs in the market is used by retirement benefit plans, endowments, foundations, governments, and corporations.
A manager of managers strategy allows the manager to determine a defined framework for asset investments. Institutional managers overseeing institutional investment programs can then choose from a broad range of offerings in the marketplace to fit specified portfolio allocations.
Institutional Investment Programs
Most institutional investment programs use a manager of managers strategy to comprehensively manage assets. This typically involves a board of trustees employed by the institution as the manager. A manager of managers strategy allows an institution to work with several institutional investment managers to achieve investment exposure for a predetermined asset allocation program.
Institutional clients deploying this strategy invest in institutional share classes and institutional funds offered by investment managers. They may also work with an investment manager to manage assets in a separate account. Through a manager of managers strategy, the institutional client manager has regulator meetings with investment managers and also receives status reports on the investments. Institutional managers track the performance of each investment manager and have the power to replace underperforming managers or make changes to investment allocations based on the comprehensive program.
Example of the Manager of Managers (MoM) Approach
As an example of a manager of managers approach, consider a teacher's union. This group has a board of trustees that oversees the investment program for the union’s pension plan. The board of trustees is considered the manager. They determine an appropriate portfolio with allocations to various sectors and segments of the market. The manager of managers then hires a number of investment managers to manage assets in the various categories, investing portions of the pension funds assets with various investment managers. Funds can be allocated to multiple categories including money market funds, bond funds, and stock funds.
Each manager has the responsibility of managing the particular investment fund for which they provide services. The manager of managers is responsible for ensuring they are used as effectively as possible. Because no single manager is an expert at investing in all asset classes, using a manager of managers strategy allows clients to have an expert asset manager working on each aspect of an investment at all times.