OpinionOct 15 2014

Why marketing ‘the next big thing’ needs attention

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A recent conference and a series of articles in a wide variety of trade papers have drawn my attention to ‘the next big thing’: multi-asset investing.

On first hearing the phrase I was curious; after all, surely anything that is not a single asset fund is a multi-asset fund? And why all the fuss? We have had with profits funds for centuries and unit-linked managed funds for decades, and what are they if not multi-asset funds?

Or is that phrase supposed to convey something different, perhaps something new in the world of investment management? If this multi-asset thing really is different to what old timers like me call with profits or managed funds, how exactly are they different?

More to the point what is the impact on our clients? Or maybe this is just another clever ploy from those whizz kids in the marketing department to make us (and the clients) think we are getting something shiny and new, instead of something that has been around in one form or another for hundreds of years?

One major problem is that the fund managers and their sales teams seem to be unaware of the issues affecting advisers and their use of investments to meet client objectives. I have previously discussed the question of the definition of risk. Now add into the mix what the regulator might think about diversification and asset allocation. Top that with a rabid hatred of anything involving derivatives.

Fund managers and their sales teams seem to be unaware of the issues affecting advisers

Then read one fund manager’s explanation describing a “sophisticated investment portfolio driven by strong individual investment ideas” and a team “afforded a great deal of freedom …[including] use of derivatives to place more sophisticated positions around particular ideas and themes” and maybe you, like me, can predict a perfect storm.

Let me be clear, I see nothing wrong with multi-asset funds. I would never in a million years rely on the IMA sector in which they might be found because we already know that is of zero relevance to the regulator and the assessment of your advice.

They may well be managed to reduce risk (whatever that means) or outcome-focused funds designed to meet income or growth targets with minimum volatility, but until fund managers and their marketing departments understand the advice implications of such flexible funds, with hugely variable equity content, maybe containing derivatives, they will have failed to bring to the market a fund that we can easily use with our clients.

Gill Cardy is network development director of Validpath