Allianz forced to revamp RiskMaster fund range

Allianz Global Investors has been forced to go back to the drawing board with its flagship RiskMaster range of risk-targeted products following a sustained period of underperformance.

The group has overhauled the strategic asset allocation for the four funds less than two years after they were launched, almost doubling exposure to global equities at the expense of commodities, real estate and emerging market debt and equities.

The multi-asset team behind the RiskMaster funds said the strategic asset allocation was the “core assumption” underpinning each fund and reflected its “3-5 year outlook on markets”.

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Since the launch of the range in May 2012, the RiskMaster funds have raised just £33m. When ranked alongside comparable risk-targeted funds, the products have produced some of the lowest returns in the period since their launch, according to data from FE Analytics. The funds are all bottom quartile in their respective IMA Mixed Investment peer groups.

Allianz will be hoping the range can pick up traction and see improved performance, given the growing importance of risk-targeted, multi-asset ranges as ever larger number of advisers outsource their investment management responsibilities.

Fraser Blain, head of UK retail sales at Allianz, said: “While we have made a strong start to the year, performance for the preceding six months for the RiskMaster funds was disappointing. We therefore initiated a review of the strategic asset allocation and as a result we have amended the allocation for the RiskMaster funds.”

The management team said the effects of the US Federal Reserve’s plans to reduce the scale of its bond-buying programme – which began at the start of this year – had drastically affected certain asset classes to the extent that the funds’ core allocation could not react to the changing outlook.

Consequently, RiskLab, the German company owned by Allianz, which is responsible for the funds’ methodology, has in recent weeks slashed the target allocation to emerging market bonds by more than half across all four portfolios. This is based on a “new house view” that the asset class will underperform on a 3-5 year view.

Similarly, exposure to commodities has been drastically cut from 9-16 per cent, dependent on the fund, to just 1-1.5 per cent. The managers said: “The commodities supercycle has ended as China must transition to a lower structural growth trend and the lagged impact of prior investments on the supply side will weigh heavily on prices.”

The managers have also reduced their holdings in UK government bonds and implemented a low-duration strategy, which means focusing on bonds with a short lifespan before maturity, to limit the portfolios’ exposure to adverse movements in interest rates.

Mr Blain added: “We believe our investment process can produce superior long-term outperformance while remaining true to our key fundamentals.”