The 2017 surge in multi-asset flows is almost entirely down to Vanguard products, according to data that emphasises the price pressures facing the sector.
Multi-asset portfolios are on track to outsell both equity and bond funds this year for the first time since 2012, data from the Investment Association (IA) shows. More than half of these multi-asset flows have gone to funds that sit in the IA’s three Mixed Investment sectors.
But Morningstar figures show this surge in popularity is in large part due to Vanguard’s LifeStrategy range. The four LifeStrategy funds that sit in the Mixed Investment sectors took in £1.8bn in the first seven months of 2017, out of a total of £3.6bn for the sectors as a whole.
The data also emphasises that traditional multi-asset funds are struggling to garner any sort of interest from investors.
Only eight funds out of the 109 in the Mixed Investment 20-60% Shares sector have taken in more than £80m apiece this year.
Mark McFee, of consultancy Mackay Williams, said Vanguard’s decision to cut fees on the LifeStrategy range at the start of January had accelerated inflows.
“Aside from the cost point, there is also the one-stop-shop element – these sorts of diversified investments save advisers from having to build portfolios from scratch,” Mr McFee said.
One area of the active multi-asset fund market is still attracting attention from intermediaries. Data suggests that market interest is now split between the Vanguard funds, and risk-rated ranges that sit outside the Mixed Investment sectors. Multi-asset funds that reside in the Unclassified sector have taken in £2.6bn so far this year, according to the IA.
Standard Life Aberdeen’s MyFolio and Old Mutual Wealth’s Cirilium offerings are also among the most popular risk-rated ranges, Mr McFee said. However, these sales figures would have been aided by the fact both firms own adviser businesses.
David McCann, a director and analyst at broker Numis, said there was evidence of an overall increase in interest in multi-asset funds, but added prices may be under threat.
“As the highest [charging] sector, multi-asset funds are potentially more at risk than some from price disruption,” he said.
Abraham Okusanya, of consultancy Finalytiq, pinned the surge in Vanguard flows on performance.
“Our research into multi-asset funds shows each Vanguard LifeStrategy fund outperformed virtually all the corresponding multi-asset funds over three and five years,” he said.
“Advisers are increasingly shunning these expensive multi-manager propositions that add little or no value.”