Multi-asset funds are particularly beneficial for investors with smaller pots of cash, says David Jane, manager of multi-asset funds at Miton.
Mr Jane says investors with smaller pots of cash are an ever-growing proportion of the market as they are able to achieve almost instant asset diversification by investing in just one fund.
He says they are also an excellent choice for long-term investors who are content to leave the decision about which assets to invest in to expert fund managers.
Mr Jane says: “Multi-asset funds make a useful core investment particularly when blended with more individual selections as satellites.”
A multi-asset fund can be a good option for a first-time investor, says James Priday, director of Strawberry Invest.
With a multi-asset fund, Mr Priday says one holding provides the investor with instant diversification by asset class; additional capital and regular contributions can be easily added to the holding; and the investor has peace of mind that their capital is being professionally managed.
He says: “People with relatively modest investment amounts can achieve a level of diversification that would be difficult and more costly to achieve by allocating smaller amounts of capital to specific asset classes.
“Asset allocation and stock selection decisions are delegated to professional fund managers; this can be an attractive feature in itself for some investors.”
Mr Priday says it is also possible to utilise multi-asset funds as part of a ‘core-satellite’ asset allocation strategy.
Given their diversification by asset class, Mr Priday says multi-asset funds could form the core of a portfolio, around which are positioned more specialist funds investing in (for example) corporate bonds, North American, European and Asian equities, and commercial property to specific exposure to areas designated as being likely to drive performance.
Multi-asset funds are often used as long term savings vehicles by people who don’t want to witness equity-like volatility or significant drawdown in the value of their investments, says Mark Wright, fund manager at Seneca Investment Managers.
He says: “They often serve as a core part of an investor’s portfolio, around which additional investments are usually made in single strategy funds or direct equities, for example.
“There are a large number of multi-asset funds available, so investors should be able to find one that matches their risk tolerance reasonably well.”
Craig Nowrie, multi-asset client portfolio manager of Threadneedle Investments, says any investor who is concerned about volatility should consider multi-asset funds. For example, he says pension schemes are increasingly focusing on achieving strong returns for each unit of investment risk that they take.
In relation to defined benefit schemes, Mr Nowrie says this reflects concerns on how to close funding gaps in a more predictable manner and manage pressure from their sponsors over balance sheet volatility.
In terms of defined contribution participants, Mr Nowrie says the trend reflects attempts to support their funding gap (i.e. their retirement goals).
He says: “Multi-asset funds specifically aim to achieve attractive total returns with low levels of volatility. For this reason, they should be central to pension schemes or any investor who wishes to control volatility.”
But Juliet Schooling Latter, head of research at Chelsea Financial Services, says it is not just pension savers, first-time investors or those with small pots who should invest in this vehicle - she says everyone should consider investing in multi-asset funds.
Ms Schooling Latter says multi-asset funds may be attractive to any investor who does not want to worry about making asset allocation decisions themselves.
Michael Parsons, head of UK funds sales at JP Morgan Asset Management, agrees that multi-asset funds can be appropriate for a broad range of investors.
He says: “Investors who are seeking medium to long-term capital appreciation from balance exposure to risk assets should consider multi-asset approaches.”
