Were all advisers able to select the “right” funds in general, let alone multi-asset funds in particular, then investment advice for clients would be a piece of cake. The reality, of course, is the opposite and every day somebody somewhere rolls out a new investment idea or vehicle, marketing it as the next best thing since sliced bread.
In a nutshell, multi-asset investing is a means to get a wide and diversified investment mix across a range of sectors and assets. The underlying investments will include bonds and equities, but should also include a more alternative view with commodities and infrastructure exposure. Spreading the net widely provides a high level of diversification.
To be able to select multi-asset funds for a client portfolio, the adviser must understand the client's objectives and have established their appetite for risk and reward. The route for fund choice is:
- Factfind.
- Understand clients' objectives.
- Establish their attitude to risk.
- Make fund choices.
Each step is dependent on the previous one and helps get a clear strategy in place before making any investment.
With this process agreed, due consideration can be given to the choice of multi-asset funds, which is growing all the time and I would suggest adding to the complexity of fund selection for both growth and income oriented clients.
A robust investment selection tool or process is essential to be able to cut through the marketing and see the true credentials of funds. Look at the different permutations of what is available.
Something that often gets overlooked when considering multi-asset investing is that some managers might choose to build their fund around carefully selected equities and bonds while others work with a different, but equally valid, approach through the multi-manager model and invest in a range of funds. With the multi-manager approach, some offerings will be fettered and use in-house funds while others will use various investment house funds. During different parts of the economic cycle, many multi-asset managers will use a mix of active and passive tools to manage upside benefits and downside risk.
Investors and their advisers have a wide choice. Table A highlights some examples.
Table A
Income and/or growth | Premier Multi-Asset Distribution |
Multimanager funds | Jupiter Merlin Portfolio range |
Defensive funds | Newton Real Return |
Specialist funds | BlackRock Dynamic Diversified Growth A Acc |
If we take a moment to look under the bonnet of the Premier Multi Asset Distribution fund we can see what is included under this multi-asset umbrella, Table B shows its six top holdings.
Table B
Standard Life Investments UK Equity High Income Inst S Inc | 5.08% | |
Schroder Income Fd Z Inst Inc | 4.90% | |
Franklin UK Equity Income W Inc | 4.67% | |
Rathbone Income Inst Inc | 4.61% | |
Fidelity Moneybuilder Dividend Y Inc | 4.46% | |
Polar Capital European Ex UK Inc | 3.7% |
While the Newton Real Return's breakdown in Table C looks very different.
Table C
United States of Amer Treas Notes: 1.75% BDS 30/11/21 USD100 | 5.81% |
United States of Amer Treas Notes: 1.75% BDS 31/12/20 USD100 | 3.87% |
Novartis AG | 2.26% |
Microsoft Corp | 1.86% |
Wolters-Kluwer NV | 1.84% |
