Multi-asset funds: special report

  • Gain an understanding of the current state of the top multi-asset funds
  • Be able to describe the sentiments of fund managers mentioned in the article
  • Comprehend looming prospects for multi-asset funds.

The comments come despite the likelihood that funds targeting different levels of volatility will be grouped together in the new sector. For now, simply separating these products from those targeting a particular level of return has satisfied many in the industry.

The IA has described the launch of the sector as a “first step… to reflect the market’s drive towards outcome-focused funds”, and has said further work may follow in the future, including a look at whether or not multi-asset income funds deserve a specific grouping of their own.


Upsides and downsides

Managing volatility has not been too much of a problem in recent times. The infamous Vix volatility index has been sitting at record lows, and in the US the S&P 500 has just finished a spell of more than 100 days without a fall of 1 per cent or more – the longest such streak since the mid-1990s. 

The biggest political events of last year, the EU Referendum and the US presidential election, in theory brought with them a great deal of risk for investors. In reality, they proved less serious, but multi-asset fund managers say they were well prepared because of their exposure to a number of asset classes. 

Jaisal Pastakia, investment manager at Heartwood Investment Management, says: “Determining what the outcome is when it comes to these events is a challenge, and that’s double compounded by the fact the way markets react is not necessarily predictable. Therefore, for us as investors, it’s very hard to say we’re going to directly position for a particular outcome”. 

Over the coming year, Mr Pastakia will instead try to identify situations where sentiment appears out of kilter with fundamentals. “If we feel that sentiment is too negative compared to a particular outcome, that may provide an opportunity for us. Geopolitics may create volatility, and there may be times when we want to take advantage of such volatility”. 

Fidelity International’s Mr Howse, meanwhile, suggests that volatility will remain “very low this year, with almost nothing able to spook the markets”. 

“To some extent, this is because of the pick-up in economic data, with the global economy having accelerated over the past six months and events like the Dutch elections having actually produced benign market outcomes.”



Table 1 identifies the top-performing funds in each of the four IA mixed asset sectors for the five years to 28 February 2017. Despite the aforementioned difficulty in comparing such products across a range of metrics, focusing on equity exposure can be a helpful way of breaking down multi-asset performance.