Multi-asset funds are often dubbed “a one stop shop” for clients looking to diversify their returns.
But what does this mean?
David Bebb, chartered financial planner at Pannells Financial Planning, says: “Multi-asset funds are considered a 'one-stop shop' for investors and advisers alike because in days gone by, to achieve a specific objective, quite often a portfolio of individual fund holdings would be allocated to attain the desired asset allocation.”
Most in the industry stress that the biggest advantage of multi-asset is its ability to diversify returns.
Mr Bebb adds: “Multi-asset funds offer diversification for clients who would otherwise struggle to achieve this on their own. It is also potentially a lower cost strategy for investors, depending on selection.”
Alan Chan, director and chartered financial planner at IFS Wealth and Pensions explains that multi-asset funds provide diversification for the investor as the underlying portfolio contains a spread of investments including equities, property, bonds and cash.
He adds: “In other words, the fund is designed as a single solution for investors.”
Mr Bebb says: "Multi-asset funds offer diversification for clients who would otherwise struggle to achieve this on their own [and is] also potentially a lower cost strategy for investors depending on selection.”
So what diversification benefits do multi-asset funds bring to financial advisers?
Benefit to advisers
Some in the industry note that multi-asset funds are useful to advisers in helping target risk profile.
Gareth Deacon, portfolio manager at Blackfinch Wealth, says: “By utilising a multi-asset fund or portfolio from a single provider, the financial adviser should be confident that the provider is considering many factors in the overall portfolio construction on a daily basis.”
He adds that by selecting a portfolio that has been independently risk-rated, the adviser can also be confident that the portfolio will be managed to that target risk profile.
This ensures that any tactical positioning undertaken is always done so “while being cognisant of the overall risk profile of the portfolio”.
Mr Chan says: “You could even use a few multi-asset funds to provide a blended approach, for instance a blend of active and passive investment styles.”
Mr Deacon notes while many multi-asset investments continue to target outperformance of an industry benchmark or peer group, it is possible to find providers that target more specific, client-focused investment outcomes.
He explains this brings abundant further benefits, including increasing the level of understanding that an end investor has of the expected investment journey that their portfolio may take.
“It also helps in making clear exactly what the manager is aiming to achieve, allowing performance to be monitored in absolute terms, rather than simply relative,” adds Mr Deacon.
Danny Knight, investment director a Quilter highlights four main options available to an adviser to provide a professional investment portfolio to clients.
- Adviser run model portfolio
- Outsourced model portfolio
- Discretionary manager
- Unitised fund structure, like a multi-asset fund