Your IndustrySep 18 2014

Alternatives to multi-asset funds

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Investors can construct a portfolio from equities and bonds even including some alternative asset classes, says Jeremy Roberts, head of UK retail sales at BlackRock. In fact, Mr Roberts says this is the way in which most investors traditionally used to invest their money.

However, he says while you may be able to put a diversified portfolio together today, what will it look like tomorrow?

Mr Roberts says: “Markets are dynamic; your portfolio must be too. We believe flexible portfolio management is core to reaching client outcomes.

“Today, investors are faced with a multitude of challenges including low rates and high valuations. Static, or single asset class solutions, are unlikely to be able to address all of these challenges anymore.”

A barbell approach of using only cash and equities is a potential alternative to Multi-asset funds, notes Mark Wright, fund manager at Seneca Investment Managers. But he warns in adopting such a strategy, investors would be actively ignoring multiple asset classes which are likely to include numerous attractive opportunities at various stages in the investment cycle.

He says hedge funds have a similar investment objective to multi-asset funds in terms of reducing volatility and relying less on equity markets to generate capital growth, however warns they typically cost more and past performance from the industry has been largely disappointing, while returns have varied significantly between different managers.

Juliet Schooling Latter, head of research at Chelsea Financial Services, says the alternatives are basically building your own portfolio and changing asset allocation or rebalancing on a regular basis, or using a discretionary fund manager to do some of this work for you.

But for investors looking to generate a steady and sustainable set of returns or income over the long-term, James Bateman, head of portfolio management of Fidelity Solutions, says a multi-asset solution is likely to always be the most effective way of doing so.

He says while an alternative to a multi-asset fund is to hold a range of asset classes individually in your portfolio investors are unlikely to be able to access the full breadth of assets available to professional portfolio managers.