InvestmentsAug 15 2018

Is multi-asset investing the best approach for clients' portfolios?

  • To understand the differences between multi-asset and multi-manager
  • To learn about the investing principles behind the different of fund
  • To grasp why one might have advantages over the other
  • To understand the differences between multi-asset and multi-manager
  • To learn about the investing principles behind the different of fund
  • To grasp why one might have advantages over the other
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Is multi-asset investing the best approach for clients' portfolios?

Delegating your investment process to managers with different aims and views of the world waters down both the strategy and potential returns. 

David Coombs is head of multi-asset investments at Rathbone Unit Trust Management  

 

In favour of multi-manager investing: Gary Potter, co-head of multi-manager at BMO Global Asset Management 

The words ‘multi-asset’ seem to us to be the two words that are used most commonly these days by wealth management providers and commentators to describe what they perhaps believe to be a new way of providing outsourced investment solutions, as distinct from ‘multi-manager’ which the same observers often interpret as a more traditional approach. 

In some cases, the successful use of the words ‘multi-asset’ is undoubtedly a triumph of marketing concept over substance, or indeed results. But a fair assessment would point to some subtle differences which need clarification.

Although we are, and indeed have been ‘multi-asset’ managers for all of our team’s existence over 22 years, our nine strong multi-manager team is primarily responsible for managing 10 multi-manager fund-of-funds, and there is a clue in the narrative. 

Perhaps obviously, the fund-of-fund structure gives the game away in that the guiding principle is that they are built by largely outsourcing to the best investment management talent that can be found from a primarily bottom-up perspective, principally through collective investment vehicles, which is not necessarily the starting point for your typical multi-asset manager.#

 

Yes, they can use collectives on occasion, but would also claim to invest, among others, in direct securities, instruments, factor or style based investments or, more simplistically, individual fixed income securities or direct equities, with one of the key drivers being to reduce the cost of creating a client solution, and that motive can not obviously be criticised. 

Fund of funds, again generalising, are perhaps a little more transparent and simple to understand by the end investor and this is important – Gary Potter

Both approaches seek to provide a one-stop solution for investors while targeting specific outcomes based on differing levels of risk tolerance, capital growth and income needs.

Both equally argue the benefits of portfolio diversification in a world where the numberof investment strategies continues to expand. But perhaps one of the key differences is the greater focus on macroeconomic and market drivers to asset allocation with multi-asset and a greater focus on bottom-up manager selection with the more traditional fund-of-funds, as a generalisation.

It is not obvious to me that a greater reliance on macro is always the right way to go.

Value and price

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