Multi asset – Feature


Multi asset investing can mean different things to different people. Andrew Holt looks at what investors need to know.


as it promotes itself, combining multi assets: stocks, bonds, real estate or cash to create one big, but nimble and, importantly, diversified portfolio.


The idea being a simple one: that by balancing asset classes this can achieve particular investment outcomes, such as growth, income or risk minimisation.


Strong investment


As a result of these solid investment principles, institutional investors have long regarded multi asset as a strong basis to build their own investment approach, based on their own par- ticular needs. “Multi-asset investing has proven popular, as it aims to provide equity like returns with significantly lower volatility, and diver- sification is key to achieving this,” Thomas says. “To be able to smooth the return profile of multi-asset funds, a manager can expand the number of sources of returns in the portfolio – for example, by introducing exposure to new and emerging sectors, such as technology or infrastructure, that


may not be highly correlated to broader equity and bond mar- kets,” he adds. For Maria Municchi, a multi asset portfolio manager at M&G Investments, the type of strategy is important, where for her a tactical asset allocation is an important part of the mix. “For a multi-asset solution, carefully considering strategic invest- ment decisions is only one pillar to generate returns over the long-term,” she says. “It is also important to be able to respond to short-term investment opportunities through tactical asset allocation decisions. “Often bouts of volatility, which materialise as excessive bearishness and bullishness, are not driven by a genuine change in the economic backdrop, instead prices may detach from fun- damentals for reasons that are behavioural,” Municchi adds. M&G’s philosophy remains focused on observing market prices and on making a judgement if investors are acting emo- tionally rather than objectively assessing the economic envi- ronment. “Whenever we identify a mispricing caused by investors’ irrational behaviour, we respond by rebalancing our


Issue 108 | November 2021 | portfolio institutional | 45


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