Striving to ‘smooth investment journey for customers’

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Multi-Asset - November 2014

Asset allocation in multi-asset funds can range from traditional bonds and equities, all the way to what might be considered more alternative investments, such as private equity and property.

For many, multi-asset investing should live up to its name and do exactly what it says on the tin, which is invest in a range of different asset classes.

The continuing popularity of these types of funds is evident in figures from the Investment Management Association (IMA), which show that in August 2014 mixed asset was the second best-selling asset class, with net retail sales of £232m.

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In the top-five best-selling IMA sectors in the same month, the IMA Mixed Investment 40-85% Shares sector ranked third, having clocked up net retail sales of £159m. The IMA Mixed Investment 20-60% Shares sector took fifth place with £90m of net retail sales during August.

Mark Rockliffe, head of intermediary sales at Heartwood Investment Management, asserts that many investment companies are jumping on the multi-asset bandwagon and repackaging multi-manager products as multi-asset.

He explains: “You will get a very different opinion from different managers as to what a true multi-asset portfolio and multi-asset fund is.”

He insists that a “purist view” is that multi-asset investing is not just about investing in multiple asset classes.

“It is about investing in a range of products and instruments that are more than just funds. Investors are becoming more discerning in terms of what they expect from a multi-asset portfolio,” he suggests.

There are a number of tools that investors can use to understand how a multi-asset fund is invested, including fund fact sheets and ratings agencies.

Mike Parsons, head of UK funds sales at JPMorgan Asset Management, notes: “Advisers can glean information from most fund management groups’ websites, which should include fund factsheets, portfolio information, details on investment approach and manager philosophy and performance track record.”

He adds that they can also judge the commitment and expertise of fund management groups by the quality of content they provide around investment solutions.

Mr Parsons continues: “It is important to fully understand the asset allocation approach of the multi-asset fund and to assess the resources available to the manager.

“Do they have an experienced investment management team? Is their investment process fully and comprehensively explained? Do they have a robust asset allocation expertise?”

These are some of the questions that advisers and investors may want to have in mind when selecting a multi-asset fund for a portfolio.

Mr Rockliffe considers why an investor would choose a multi-asset fund and their expectations.

“I think in most cases, multi-asset investing is about trying to smooth the investment journey for customers in-keeping with their appetite for risk,” he says. “One of the things that multi-asset investing does is it enables you to capture investment returns from across the world.

“In doing that, if they’re well managed, true multi-asset funds will enable customers to be on the end of a more consistent, perhaps a more predictable range of investment returns and that’s why they’re really popular.”