Talking Point  

Advisers relying on multi-asset funds for diversification

Advisers relying on multi-asset funds for diversification

Advisers have said they are typically relying on multi-asset funds to achieve diversification in client portfolios.

The latest FTAdviser Talking Point poll revealed 45 per cent of advisers said they would choose a multi-asset fund for diversification, while 26 per cent said they used them in the accumulation stage of clients investing to grow funds.

Patrick Connolly, chartered financial planner at Chase deVere, acknowledged they tended to use these funds for clients with smaller portfolios, which he defined as sub-£100,000 but certainly for those with portfolios of under £50,000.

He reasoned multi-asset products were an “easier way to achieve diversification”. 

Only 5 per cent would select a multi-asset strategy to meet clients’ income requirements, according to the poll results.

Joshua Gerstler, financial adviser at The Orchard Practice, commented: “We do use some multi-asset income funds, mainly to provide a boost to the income streams for certain clients – generally those who take drawdown, or are either getting closer to or are already in retirement.

“Occasionally we will deploy them as a portfolio diversifier if there is an area/asset class we or the client feel is underrepresented, but not so much that it justifies using a focused fund.”

Nearly a quarter, or 24 per cent of advisers, said  they did not use multi-asset funds at all for clients.

Mr Connolly suggested for those clients with £100,000 or more, he would not use multi-asset funds.

He also questioned whether the products were cost effective and observed while multi-asset funds could be used for ease of administration, advisers needed to “be wary of costs”.

“You get the benefits of a buy-and-hold solution but often that comes at a cost in terms of charges,” he said. 

“Funds of funds are often very expensive. It’s not unusual for ongoing charges of over 2 per cent per annum.”

Asked why multi-asset funds were such a useful tool for advisers, Mr Gerstler noted that they were particularly useful when a client felt there was an area they could be more exposed to without making a concentrated bet.

“The multi-asset funds on our list invest around the globe through a wide range of asset classes and regions, and afford exposure to these without putting too much emphasis on a particular one, which, if accessed through a more focused fund, might cause the client’s portfolio to deviate from their risk profile and/or needs and objectives,” he explained.