The huge popularity of multi-asset strategies has prompted a bewildering line up of increasingly sophisticated funds. Pádraig Floyd investigates.
The more things change, the more it is the same. It sounds better in French, but it could be a slogan for the world of pensions and is no less suitable for the area of multi-asset investments. Multi-asset has long been a favourite approach from the days of balanced funds as a (relatively) cheap way to access a little bit of everything. At least as far as ‘everything’ extended in those days. However, balanced proved to be flawed. Schemes bought in the certainty they would be better diversified and get better returns, and the reality was somewhat different. But, multi-asset has experienced something of a resurgence in recent years, with the development of new approaches and in particular diversified growth funds (DGFs) which seem to offer all things to all men. Their success is perfectly understandable – increasing longevity and uncertain markets are difficult for pension schemes and any help on reducing volatility and increasing returns is gratefully accepted. Now that these new breed of multi-asset funds have established themselves, there are new funds seemingly every day offering something new. THE LONG AND SHORT OF IT The most sophisticated diversified growth funds have evolved a long way from traditional balanced management and tactical asset allocation, says Matthew Merrit, head of the multi-asset strategy team at Insight Investment, and offer the full opportunity set available in capital markets today.
“We don’t want to find ourselves in cocoa futures as everyone stops drinking hot chocolate. Don’t give managers carte blanche – if they want to be in commodities, then let’s talk about what they are going to be.”John Nestor