Responding to this criticism, wrap fund managers plan to publish a regular independent performance measurement survey for wrap funds, similar to that for unit trusts. Though most wrap fund managers are keen to polish up the industry's image and contribute to such a performance survey, some managers are unwilling to participate in the process. A regular performance measurement survey should undoubtedly make a meaningful contribution towards establishing credibility in the wrap fund industry. Lambrechts says he hopes once a survey is launched, non-participating wrap funds will change their minds. One reason for the ascendancy of wrap funds is the ability of intermediaries to brand the funds as their own, while leaving the administration and management to the professional fund managers.
Further criticism aimed at wrap funds is their less than stellar performance.
Trevor Garvin, a director of Edge Asset Management which manages wrap funds on behalf of TMA, says there is widespread misunderstanding of their role. But others say wrap fund performance, rather than occupying a happy middle ground, are often pedestrian, costly and measured against inappropriate benchmarks. Investors derive little comfort from funds which promise to replicate or slightly better the average performance of unit trusts - given their flaccid performance in recent years. There is also concern that wrap funds are not passing on to investors the cost savings negotiated with unit trust companies. Garvin says international wrap funds are attracting the bulk of new flows, helping drive the performance of global unit trusts over the past year.