“Even diversified portfolios suffer if you’re not flexible”

The pension reforms introduced by the government in April 2015 have been claimed as an opportunity by many areas of the industry, and fund houses have led the way.

Many asset managers have responded by launching multi-asset income funds in a bid to cater for this new market, and Fidelity International is no exception.

Eugene Philalithis, portfolio manager of the Fidelity multi-asset income range, observes: “It’s an area that we see as vital because the way that I think about it, in the investment management industry we’ve taken care of people up to their retirement and then traditionally they have gone and bought an annuity, and that’s the end of our role in this whole process.

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“But now, with the pension reforms and the flexibilities, it means we need to think about providing solutions beyond retirement.”

But he believes changes were afoot before the reforms. He joined Fidelity’s multi-manager team from Russell Investments in 2007. Even then, he could see the opportunity for multi-asset. He explains: “I think what happened in 2008 was there was very much a step change in the way investors thought about how they allocated their capital.

“Having a diversified portfolio is fine when diversification works, but I think in 2008 we saw very clearly there are times when even the most diversified portfolios can suffer if you are not flexible in your approach and if you don’t position the portfolio accordingly.

“So I think there was a move [away] from looking at [investments and saying], ‘Let’s build up a multi-asset portfolio of different assets and it will be fine in the long run’. We saw that volatility in 2008 caused investors to rethink, and us to rethink as well, that there might be a different way to be able to deliver that outcome.”

It was not only Fidelity that rolled out changes to their products following that period encompassing the financial crisis, as Mr Philalithis acknowledges.

“I think it’s a feature of where the industry has changed as well. So it’s not just us, it’s very much an industry-wide approach, the adoption of more flexible mandates, the adoption of less benchmark-focused and more targeted return products – I guess the industry is focusing on absolute return mandates. Those have all been growing in popularity and we’ve evolved as well in terms of the way we manage investments.”

He insists this alternative way of thinking about your portfolio and investing does not mean everything has to be multi-asset, although clearly the asset management industry thinks otherwise.

As he points out, though: “The starting point of the discussion is different as opposed to 10 years ago when it was, ‘do you want equities, do you want fixed income?’ Whereas now I think having the solutions approach, it’s about having that discussion and thinking about what are your needs, and what is the best way to meet those needs.