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Fund Review: Multi-Asset Income

Introduction

It is unsurprising, therefore, that many fund houses deemed the second half of 2014 and early 2015 as the perfect time to launch new multi-asset income products to target the new at-retirement market.

Columbia Threadneedle was one of the first out of the blocks with the Threadneedle Global Multi-Asset Income fund, managed by Toby

Nangle, which has made a return of 8.83 per cent since its launch at the end of July 2014, compared with the 7.26 per cent IA Mixed Investment 20-60% Shares sector average.

Other offerings emerging last year came from Franklin Templeton, Psigma Investment Management, Aviva Investors and Schroders. In 2015, new launches have come from Newton and BlackRock, but with the likelihood that more will follow in their footsteps.

Research from NN Investment Partners earlier this year revealed 59 per cent of the surveyed advisers thought multi-asset funds would be the ideal solution for investors following the pension freedoms.

In addition, 63 per cent of the advisers suggested multi-asset funds could serve a similar role to the default funds used by defined contribution occupational pension schemes.

Of course, these new launches are emerging into an already competitive field with long established multi-asset income funds from the likes of JPMorgan Asset Management, with its JPM Multi-Asset Income fund and the Old Mutual Generation fund range.

Nick Samouilhan, multi-asset fund manager at Aviva Investors, notes: “These funds invest in a diverse range of income-producing strategies. For instance, they might look to receive dividends on equities and real estate investment trusts, coupons on both government and corporate bonds and option premiums, in an effort to ensure that the overall income objective is met and that payouts are made at regular intervals.

“Diversification serves a second purpose: it helps to preserve capital. [But] building a portfolio to meet these goals is not straightforward, not least because the income generated by individual asset classes can fluctuate and be irregular.”

Of the 28 IA-listed funds with income and multi-asset, multi-manager or multi-strategy in the title, the average performance for the five years to May 27 2015 is a respectable 47.17 per cent, just behind the 49.76 per cent sector average of the IA Mixed Investment 40-85% Shares and the IA Flexible Investment sector average of 48.32 per cent.

Income has clearly been a driving factor for many investors for some time, but the appeal of a multi-asset portfolio, especially for the post-retirement phase, seems to be driving more enquiries.

Square Mile Investment Consulting & Research notes in its quarterly market intelligence report that searches for income-generating funds accounted for some 30 per cent of all searches in the first three months of the year.

With interest rates remaining low for the foreseeable future, along with low inflation and minimal global growth, interest in these income-targeting funds is likely to grow.

THE PICKS

Architas MA Active Intermediate Income

This £225.77m fund was launched in 2001 and aims to provide an “above average” level of income and maintenance of capital in the medium to long term through a multi-manager approach. Its top 10 holdings includes both fixed income and equity offerings from the likes of Kames, JPMorgan and BlackRock. Its largest holding is in global equity at 36.44 per cent of the portfolio, and it has returned a strong 84.6 per cent for the 10 years to May 27, compared with the 60.18 per cent IA Mixed Investment 20-60% Shares sector average.

BlackRock Global Multi Asset Income

This £72.33m fund was renamed from the BlackRock Balanced Income Portfolio fund in January 2015. It aims to provide above-average income “without sacrificing” long-term capital growth by adopting a flexible asset allocation policy. Its largest asset allocation is to US fixed income at 34.43 per cent of the portfolio; North America is also its largest regional exposure at 55.19 per cent of the fund. It has outperformed the IA Mixed Investment 20-60% Shares sector over three, five and 10 years, although over one year it has slipped slightly, with a return of 6.84 per cent lagging the sector average of 7.44 per cent.

EDITOR’S PICK

F&C MM Navigator Distribution

This £1.1bn multi-manager fund was launched in 2007 and is managed by the F&C multi-manager team. It appeared in the IA 100 Club in both 2013 and 2014, and has outperformed the IA Mixed Investment 20-60% Shares sector average over one, three and five years; its five-year return of 46.06 per cent is almost 10 percentage points higher than the sector average of 36.53 per cent. Its largest weighting is to fixed income at 31.1 per cent of the portfolio and it aims to generate a total return with an emphasis on income distribution.

In this special report