For advisers seeking the right multi-asset solution for clients, there is no shortage of choice.
A dizzying number of offerings from fund houses and discretionary managers is available on the market, with multiple approaches to elements such as risk profiling and volatility management.
Case in point: there are more than 300 funds in the Investment Association (IA) mixed investment 0-20% shares and IA mixed investment 40-85% shares sectors alone.
Indeed, the multi-asset sector has been going through a boom. Assets under management in mixed asset funds have been climbing steadily over the past decade, with £221.7bn under management in 2017, compared with £56bn in 2008.
In 2017, net retail sales hit a 10-year high of £13.3bn, more than double the inflows of each of the previous three years.
With an uncertain market outlook prompting investors to seek diversification, and tighter regulations encouraging many advisers to outsource their investment management, multi-asset’s popularity looks unlikely to diminish any time soon.
A buffer from market shocks
Funds tend to come into favour when their asset classes perform particularly well, so the fact multi-asset has seen a surge of inflows may suggest investors are nervous about where markets are headed.
Frank Potaczek, head of UK proposition at Architas, says the return of volatility to financial markets has given investors a jolt.
“Many investors were lulled into a false sense of security in 2017 as markets took everything in their stride. Even rising tensions between North Korea and the US were unable to knock the confidence of investors."
He adds: “At a time when geopolitical concerns are on the rise and volatility has returned to markets, protecting portfolios from large market spikes is possibly more important than ever.”
Single portfolio solution
As an outsourced solution that is diversified enough to provide some form of cushion from market events, it is easy to understand multi-asset’s appeal to advisers and investors alike.
Mr Potaczek says regulation has been one of the drivers of investment outsourcing and today’s adviser needs to work out where the real value is for them and their business.
“Is it in providing the investment piece in-house with the associated hours spent on fund selection, or are they better off focusing their time on financial advice?” he asks.
A multi-asset solution can take several forms. These include risk-managed funds, outcome-orientated funds, passive multi-asset portfolios, model portfolios, discretionary fund managers, with-profits funds as well as traditional multi-asset funds that are not aligned to any volatility or risk targets.
“There is certainly no right or wrong approach for advisers, but the regulator is increasingly focused on the repeatable process advisers use to ensure the investment outcome is suitable, and remains suitable, for the client,” Mr Potaczek says.
Rick Eling, technical director at Quilter, which owns adviser network Intrinsic and Quilter Private Client Advisers, says whether it is an open-ended fund or a discretionary fund manager, the benefit to multi-asset is that it is a one-fund portfolio solution.