Asset allocation could once be done in a very simple way: bonds and equities were viewed as inversely correlated, that is, they moved in opposite directions to each other.
Investment styles also tended to come in and out of fashion, but in a way that was broadly foreseeable.
Value funds tended to perform best when the economy is growing robustly and inflation is on the rise, while growth funds tend to perform best when economic growth is muted and inflation is low.
Bonds tend to perform best when economic growth is uncertain and investors are attracted by fixed income and higher levels of certainty.
The challenge for fund pickers over the past decade has been that bond prices have persistently hit new highs, while the economy has been strong enough for growth funds to perform well, the momentum has not been there for the typical switch from growth to value to take place.
Darius McDermott, who runs a range of multi-manager funds at Chelsea Financial Services says the rise in bond prices, and therefore the collapse in yields, means the traditional approach to multi-asset investing has broken down.
He has replaced much of the government bond exposure in the portfolios for which he is responsible with alternative assets that pay an income.
For Rob Burdett, multi-manager fund manager at BMO, asset allocation is a key question.
He particularly focuses on having value funds in the portfolio right now, as he believes those assets are cheap relative to growth funds.
He added that his funds have allocations to assets which are not correlated, such as caravan parks.
John Moore, senior investment manager at Brewin Dolphin says that with traditional asset allocation having broken down, this is a particular challenge for multi-manager funds which are a traditional investment product.
He says the products which survive will be those that are more flexible in their approach to asset allocation.
Craig Baker, the fund manager at Willis Towers Watson responsible for running the Alliance investment trust multi-manager portfolio, says that trying to time the market and move between asset classes is “notoriously difficult” and that in the current climate where unprecedented monetary and fiscal policies are being deployed, the task has become even more difficult.
With this in mind, he says he prefers to allow fund managers to run their money in a way that is not constrained by investment style or by Mr Baker’s own world view.
He says: “We believe that the best way to maximise long-term returns is to give skilled managers unconstrained mandates and to let them focus on just their best investment ideas.
"While this provides higher long-term expected returns, such portfolios can be too volatile for most investors to be comfortable with and so a multi-manager portfolio can provide access to these high conviction strategies but reduce the associated volatility.”
Mr Baker added that he tries to mitigate this extra volatility by choosing up to ten different managers, all of whom are likely to see the world differently, and so reduce volatility.