Multi-asset income strategies are yet to find favour with advisers in the UK, according to Investec Asset Management’s David Aird.
The caution by the firm’s UK client group managing director comes in spite of the flurry of funds that have launched in recent months.
The advent of pension freedoms has led many asset managers to make their play for the retiree market by unveiling mixed-asset funds with a focus on generating income, complementing existing multi-asset growth products.
However, Mr Aird said the evolution of the investment industry in the UK made it very different to that seen in Europe, which has witnessed significant appetite for income solutions.
“In Europe, multi-asset income funds sell like hot cakes – the banks and bancassurers sell to their captive clients,” he said.
“[But] in the UK, the lion’s share of the distribution is driven by advisers, and they like to buy their components themselves.”
Investec has one onshore product in the multi-asset income space: the £60m Diversified Income fund run by John Stopford.
But the enduring popularity of UK equity income, corporate bond and property products, as well as more recent offerings in the strategic bond and global equity income spaces, meant advisers felt familiar enough with these funds to construct income portfolios themselves, Mr Aird suggested.
“They have a propensity to buy components because of the way the industry has grown up,” he said.
His comments came in spite of a Barings study – conducted at the start of this year – which suggested multi-asset income funds were becoming more attractive to advisers, alongside their growth counterparts.
Two in every five advisers surveyed said they planned to increase exposure to income products this year, compared with 46 per cent who said they would invest more in multi-asset growth funds.
But fellow asset manager Legg Mason cast doubt on multi-asset products’ attractions as a whole in a separate study, which polled UK advisers in November and December 2014.
The study found just 15 per cent planned to invest in a multi-asset fund of any kind once the pension freedoms were introduced in April. This compared with 25 per cent who said they were looking to invest in an equity income fund.
Mr Aird said the past success of flagship multi-asset products, such as the SLI Global Absolute Return Strategies, Troy Trojan, Newton Real Return and Ruffer Total Return funds, showed there was an appetite for vehicles that did not have a specific income focus.
Looking ahead, the popularity of income products was “potentially a matter of time” as advisers grew more accustomed to such funds, he acknowledged.
But he added that appealing to the pension freedoms market should not necessarily mean the launch of new offerings.
“The products exist already in many cases,” he said.
“For those in income drawdown, most of the building blocks are in existence. We do not need to produce more products.”
Mr Aird suggested that the retiree “middle market” would be where multi-asset funds were most successful.
“Those who retire with £30,000 pots will not go anywhere near the City, or else insurance companies will offer them an automated annuity-like service of some kind,” he said.
“It is the middle market where funds will work better.”
