Six best-performing funds in Flexible Investment sector

A multi-asset manager’s ability to allocate a range of assets in one fund is part of the appeal to investors.

Defining a multi-asset fund, however, is slightly more difficult as these funds sit in several different IMA sectors.

The four IMA sectors that house multi-asset funds are Mixed Investment 0-35% Shares, Mixed Investment 20-60% Shares, Mixed Investment 40-85% Shares and Flexible Investment.

Over one year to September 16 2014, the sector that generated the best average performance is the IMA Flexible Investment with a return of 6.39 per cent, closely followed by the IMA Mixed Investment 40-85% Shares sector with an average return of 6.15 per cent.

Of the top 10 performing funds across all four mixed asset sectors ranked by one-year performance, six sit in the IMA Flexible Investment sector.

Mike Parsons, head of UK field sales at JPMorgan Asset Management, says: “As a function of their diversification, multi-asset funds should perform more consistently over longer periods than specialist or single-asset strategy funds. This is because their wide range of exposures to different returns helps to lower their sensitivity to market movements, as asset prices rarely all go in one direction at once.”

Among the bottom 10 performing mixed-asset funds based on one-year performance are some of the more cautious funds, which might be expected, including the Investec Cautious Managed fund, the WAY Global Cautious Portfolio and the Allianz RiskMaster Defensive fund. The Allianz fund has yet to build up a decent track record and has only a one-year performance, which means it has yet to prove itself.

During periods of volatility, a multi-asset fund can help investors achieve smooth and steady returns, thereby reducing risk. These funds should therefore sit towards the less risky end on a risk-reward profile.

Nick Samouilhan, a multi-asset fund manager at Aviva Investors, says: “By investing in asset classes that are uncorrelated over the medium to long term, a greater level of diversification is achieved than by simply investing in single-asset classes and the risk-return profile of the portfolio is improved.”

He adds: “Performance in multi-asset portfolios is driven predominantly by asset allocation rather than the underlying investments selected. As such, achieving cost-effective exposure to asset classes is a key feature of multi-asset funds.”

Mr Parsons notes that a multi-asset fund may be managed around a given risk tolerance or to achieve a particular objective, such as income.

He says: “Because a multi-asset fund approach relies on the fund manager’s ability to manage asset allocation and execute their investment view, a potential challenge for investors is ensuring they are picking a good manager.”

Comparing the performance of funds across the four multi-asset IMA sectors may help investors decide on which offering to invest in for the long term.

Ellie Duncan is deputy features editor at Investment Adviser