Feature – Multi asset
MULTI ASSET: EXPERIENCES MAY VARY
The financial crisis of 2008 was a great advert for multi-asset strategies. In the aftermath of the crisis, when yields were low and volatility was rising, such funds proved their value as many suffered limited losses despite the turbulence in markets. Indeed, it seems investors could not get their capital into these funds fast enough with around $3trn (£2.1trn) handed to such managers as the crisis took hold. But that was then. Over the past decade, multi asset has moved from the en-vogue style of investing to a strategy facing some serious questions.
“Investor experiences have varied over the past decade given the loose definition of what it means to be a multi-asset fund,” says Lloyd Thomas, a portfolio manager at Border To Coast. One of the issues with multi asset is the range of approaches on offer. “It is a broad church, with wide ranging strategies cov- ering anything from absolute return to passive allocation funds,” Thomas adds. “And there are also big differences in the level of equity market sensitivity on offer, meaning individual experiences can vary.”
44 | portfolio institutional | November 2021 | issue 108
Complex strategy
Assessing multi asset from an asset owner perspective, Thomas spots a few issues. “There are two main concerns when evalu- ating multi-asset strategies,” he says. “First, the high bar to per- formance. Given most multi-asset funds aim for equity-like performance while holding a large exposure to non-equity assets, this aim will always prove challenging.” The second consideration is the strategy’s complexity. “To avoid traditional income streams the fund manager will natu- rally search for alternative sources of return,” Thomas adds. “These alternative streams of return often result in greater complexity. This can make multi-asset strategies harder to monitor and to evaluate performance.”
It is here that multi asset can present challenges to investors, as the implementation of such strategies varies: from baskets of equities to a fund-of-funds approach. Some use a strategic asset allocation while others are tactical or dynamic. Although these are evident issues that need careful considera- tion, the definition of a multi-asset investment strategy can be
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