Manager of Managers (MoM): What it is, How it Works, Examples

What Is Manager of Managers (MoM)?

A manager of managers (MoM) approach is an oversight investment strategy where a manager selects managers for an investment program and regularly monitors their performance.

Understanding Manager of Managers (MoM)

A manager of managers approach is typically used in institutional investment programs. It differs from a fund of funds strategy as it involves comprehensive investment programs rather than individual investment fund products.

Institutional program managers may manage assets for various purposes, including pension funds and retirement plans. Most institutional clients choose a manager of managers strategy. Retirement benefit plans, endowments, foundations, governments, and corporations use institutional manager of managers investment programs.

A manager of managers strategy allows the manager to establish a defined framework for asset investments. Institutional managers overseeing investment programs can then choose from various offerings in the marketplace to align with portfolio allocations.

Institutional Investment Programs

Most institutional investment programs use a manager of managers strategy to comprehensively manage assets. This involves a board of trustees, employed by the institution, as the manager. Using a manager of managers strategy allows institutions to work with multiple investment managers to achieve investment exposure according to a predetermined asset allocation program.

Institutional clients deploy this strategy by investing in institutional share classes and funds offered by investment managers. They may also work with an investment manager to manage assets in a separate account. With a manager of managers strategy, the institutional client manager has regulatory meetings with investment managers and receives status reports on investments. Institutional managers track the performance of each investment manager and can replace underperforming managers or adjust investment allocations based on the comprehensive program.

Example of the Manager of Managers (MoM) Approach

As an example, consider a teacher’s union with a board of trustees overseeing the investment program for the union’s pension plan. The board of trustees acts as the manager, determining an appropriate portfolio with allocations to various market sectors. The manager of managers hires several investment managers to manage assets in different categories, allocating portions of the pension fund to money market funds, bond funds, and stock funds.

Each manager is responsible for managing a specific investment fund, while the manager of managers ensures their effective use. Since no single manager is an expert in all asset classes, using a manager of managers strategy allows clients to have an expert asset manager for every aspect of their investments.