Multi-asset  

Multi-asset funds: Multiple definitions

This article is part of
Multi-asset – September 2013

As the name suggests, multi-asset funds typically cover a wide range of assets and strategies. Managers who describe their funds as multi-asset can invest in a range of asset classes. Some choose to own structured products, property and cash while some would rather stick to just bonds and equities.

Currently, there are no set guidelines from either the IMA or Morningstar as to what constitutes a multi-asset fund. This means there is no definition as to what a multi-asset fund truly consists of, so as long as a manager holds more than purely equities or purely bonds, it can theoretically be classified as multi-asset.

In January 2012, the Investment Management Association (IMA) renamed its managed sectors after an eight-month consultation process to specify the set percentages of equities a manager in each is allowed to own.

However, there are still the mixed asset sectors – the Mixed Investment 0-35 per cent Shares, 20-60 per cent Shares and 40-85 per cent Shares sectors which can only invest the respective amount into equities, and the Flexible Investment sector in which a manager can invest up to 100 per cent equities should they wish.

Crying out

However, there is little flexibility within the sectors. David Coombs, head of multi-asset investing at Rathbone Unit Trust Management, says there is an “absolute need” for a multi-asset sector and says the space is “crying out” for it.

“There are the mixed sectors but they are too straitjacketed for us. And that is the problem. Every time we look at our funds and sectors, we find we would have breached one of the upper or lower limits,” he says. Mr Coombs’ funds sit in the Unclassified sector, where he says there is more flexibility in terms of asset allocation than other sectors. “I think that is what clients want. They want you to back your conviction, not to be constrained. But the Unclassified sector is a real mixture and a bit of a mess.”

He says a multi-asset sector will give more clarity. He says without a specific sector, different groups have different ideas on who they think are their competitors without a specific sector. “When trying to focus on how our peers are performing, it is difficult because they straddle different sectors. It would also be handy for IFAs although we find some advisers will not buy anything in the Unclassified sector – which is not good news for us,” he adds. “A bit more certainty would be very helpful.”

He points to funds such as the £17bn Standard Life Investments Global Absolute Return Strategies, £2bn CF Ruffer Total Return and £2bn Troy Trojan funds which are all multi-asset funds but “lost and hidden in other sectors”. Mr Coombs adds there are a lot of funds, particularly newer launches, which are targeting risk and no longer fit into any sector.

For Scott Jamieson, head of multi-asset at Kames Capital, a fund that can hold more than 85 per cent in one asset is “not multi-asset”. “Something like that is an equity fund which has taken some off-benchmark equity risk,” he says. A multi-asset fund should be something that has the freedom to fully exploit the financial market, he adds, not just allocating to one asset class with a “bit of icing on top”.