Investors target funds offering diversification

Investors target funds offering diversification

Mixed-asset or multi-asset funds have been growing in popularity among retail investors in recent years, particularly since the pension changes in 2014 led to a raft of income-orientated fund launches. 

But in the past year mixed-asset vehicles have started to see a surge, especially post the EU referendum. From March 2016 until the end of June the mixed-asset sectors saw net retail inflows for the first two months, but May and June recorded outflows of £68m and £186m respectively, figures from the Investment Association (IA) show. 

Since then, however, UK retail investors have been much more positive in embracing the portfolios that offer diversification and in many cases income, with March 2017 figures showing net retail sales of £818m, second only to the £1.7bn in equity sales. 

This is reflected in the performance of the Investment Adviser 100 Club Mixed-Asset members, which are split into normal mixed-asset and income-specific funds. The average 12-month performance, in sterling terms, to May 18 of the 10 mixed-asset members is 16.7 per cent, ahead of the 15.6 per cent combined average of the three IA Mixed Investment sectors and the IA Flexible Investment group. 

Even on an individual basis half of the 100 Club members beat the combined average of the peer groups, with four of these five funds coming from the Mixed-Asset category. 

The five-year performance is even more compelling, with the 10 100 Club members delivering a combined average of 64.4 per cent against the combined sector average of 47.6 per cent, and 70 per cent of the funds outperforming the peer group average on an individual basis. 

Consistency remains paramount in such uncertain times, and five of the 10 funds in the two categories are repeat members, including three from the Mixed-Asset Income range. 

With interest rates set to remain low for the foreseeable future, it is likely more investors will be looking to take advantage of vehicles that can offer both strong growth and income. 

Looking ahead, Anthony Rayner, manager of Miton’s multi-asset fund range, says: “Important recent developments span the political, economic and corporate spectra. The eurozone political pipeline suddenly looks more positive: recent economic data releases suggest we’ve moved from accelerating growth to mature growth and the corporate earnings season has been pretty impressive.”

He adds: “This doesn’t mean the eurozone’s problems are over. From a financial market perspective, political uncertainty has fallen sharply of late, and not just in the eurozone. 

“Reduced political risk, impressive corporate earnings and decent, albeit maturing economic growth all feel positive. We’re late in the cycle, compared with previous cycles, whether measured by the current economic expansion or the length of the bull market. So it’s not just the pessimists that are wondering what might disrupt what seems to be a broadly supportive environment for equities.”

Nyree Stewart is features editor at Investment Adviser