Fund review: Aberdeen Multi Asset fund

Since widening its mandate in 2008 to allow investments in alternative assets such as hedge funds and listed infrastructure, the £719.3m Aberdeen Multi Asset fund has delivered top-quartile returns.

The three and five-year performance statistics for the fund when compared with its IMA Mixed Investment 40-85% Shares sector peer group rank the fund firmly among the top performers. Its one-year performance figure to August 22, however, shows the fund dropping into the third quartile as uncertainty surrounding the ‘tapering’ of the Federal Reserve’s quantitative easing programme plagues global stockmarkets.

Head of global strategy and asset allocation on the multi-asset team, Mike Turner, explains: “We have become more cautious towards equities in the past few weeks, but not a lot. Primarily we are very aware of what has been driving valuations of risky assets, like equities, since the financial crisis.”

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The fund aims to capture long-term total returns from a diversified portfolio, which currently includes exposure to hedge funds, listed infrastructure and listed private equity, as well as traditional equities and bonds.

Mr Turner and the multi-asset team at Aberdeen take a high-conviction approach when it comes to both asset allocation and individual stock selection decisions. Since the financial crisis there has been a heightened focus on risk management within the investment process.

“Our approach to managing risk is simple: we see risk as absolute and not relative to a benchmark or index, and define it in terms of investing in a poor asset class or a poor-quality company or in overpaying for a good one,” he says.

“At a stock level, diversification is the main form of control and we will not buy a company purely because it is a major component of an index. The same is true of asset allocation where effective diversification is the predominant focus.”

Little has changed significantly among the fund’s 120 holdings, with Mr Turner claiming alterations of only 1-2 per cent in various asset classes. Equity exposure, for example, has been reduced by 1-2 per cent, and this has been allocated to listed infrastructure.

Mr Turner adds: “These investments have done very well for us, and most importantly, they are high-dividend yielding and have been able to lend more stability to the portfolio, with returns coming through yield rather than just on capital performance.

“The major thing is that they are less volatile than the general market.”

He says that the team remains “fairly wedded” to the current positions, simply replacing stock for stock when valuations have been reached. “We have a position in Canon in Japan that we are starting to come out of and that will be replaced in due course with something else in the Japanese market. That company has benefited dramatically from the appreciation in the yen and we think the share price is now at fair value,” Mr Turner explains.

The fund has roughly 4 per cent in cash, according to Mr Turner, and this is being put to work for the short term in the bond markets as gilt yields reach historic two-year highs.