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Reactions to risk-rated multi-manager funds have been mixed in the second quarter, as the style attracts increasing retail interest.

Baring Asset Management said funds under management in its risk-rated multi-manager portfolios remained more or less flat for the period.

The three Dublin-domiciled multi-manager portfolios it actively markets into the UK all set out to deliver specific annualised volatilities.

The £2.9m Baring Multi-Manager Reduced Risk fund aims for a deviation of 4-6 per cent per year. The £6.1m Baring Multi-Manager Optimum Risk fund sets a goal of 7-9 per cent, while the £78.6m Baring Multi-Manager Extended Risk fund has a target of 10-13 per cent.

By contrast, Skandia Investment Management took £22m into its six new risk-rated Spectrum funds in the second quarter, although the portfolios only launched on 28 April. Net inflows since launch now total £40m. However, Skandia's risk-rated multi-manager funds are more UK retail-orientated than Barings'.

Each Spectrum fund covers a separate risk rating of between three to eight on an overall scale of one to 10. The products allocate to a tailored mixture of asset classes based on the volatility that asset mix will produce.

As of 9 August, Spectrum funds 3 and 4 had taken more than £5m each, more than Spectrum funds 6, 7 and 8, which netted between £2-4m, but less than Spectrum 5, which took more than £11m.

Graham Bentley, head of investment marketing at Skandia UK, said advisers had become more focused on delivering capital preservation for their clients and ensuring their portfolios do not stray outside agreed limits.

"Increasingly, portfolio construction is focusing on the understanding of a client's attitude to loss and how this attitude is matched to their portfolio," he said. "Investors are far more interested in how much money they are actually making or losing rather than whether they are beating the sector benchmark."

Mr Bentley said regulatory developments had also been driving demand for risk-rated funds and should continue to do so.

"In the Retail Distribution Review interim paper, the FSA made it clear that client outcomes needed to be the primary focus for advisers. This is all about an adviser establishing and aiming to meet client expectation as best they can.

"With a risk-rated fund, an adviser brings the discussion with his client about expected outcomes to the fore. This will be beneficial to both the adviser and the client, as the client will be better able to understand what to expect from their investment."

As a result, Mr Bentley expected Skandia's risk-rated funds to become more popular. But he could not make any exact predictions on how much they would take at this stage.