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Multi-Asset - November 2014Added flexibility does not always guarantee results
As the Bank of England looks set to keep interest rates low well into 2015, and with Europe looking as if a triple-dip recession is likely, it is unsurprising investors are diversifying their portfolios.
Therefore, multi-asset portfolios remain a key component for many investors, as demonstrated by the fact the IMA Mixed Investment 40-85% Shares sector was the third best-selling category in September with net retail sales of £217m.
Overall, the mixed-asset category outsold fixed income, equity and the money market asset classes in September with net retail sales of £100m, outstripped only by property, with net retail sales of £315m, and the miscellaneous ‘other’, according to figures from the Investment Management Association (IMA).
But while multi-asset is remaining popular with investors, the performance of the IMA Mixed Investment sectors may be proving less strong than some might suspect.
For the five years to October 24 2014, the best performing mixed-asset sector was the Mixed Investment 40-85% Shares sector, with an average return of 36.46 per cent. It beat the other three mixed-asset sectors, which comprise Mixed Investment 0-35% Shares, Flexible Investment and Mixed Investment 20-60% Shares.
It is perhaps surprising that the Flexible Investment sector, which as the title suggests has more flexibility in its asset allocation, lagged behind slightly with an average return of 34.82 per cent.
But all four of these sectors were outstripped by the performance of the FTSE All-Share index, which delivered a return of 50.92 per cent, according to data from FE Analytics.
On a shorter time frame, however, the results are almost reversed.
For the year to date to October 24, the FTSE All-Share index sinks to the bottom of the pack with a loss of 2.54 per cent, while the seemingly more cautious Mixed Investment 0-35% Shares sector topped the list with an average return of 2.42 per cent.
A result that is not surprising given the macro and geopolitical turmoil so far this year.
But returns within the mixed investment sectors for the year to date to October 24 have ranged from a positive 8.16 per cent at the top of the field to a disappointing -8.62 per cent at the bottom of the scale.
This clearly demonstrates that while these funds are often placed within the same sector, this doesn’t mean they will always deliver the same returns.
Multi-asset is designed to give investors added flexibility – they should just be aware that this doesn’t always mean the result will be a positive one.
Nyree Stewart is features editor of Investment Adviser
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