Five of the Best: Multi-asset funds for a post-RDR climate

Flows into multi-asset products have been growing consistently in recent months, and multi-asset now constitutes 11% of the UK funds market.

The UK is the largest holder and fastest growing market for multi-asset funds, with inflows of £23.5bn in 2012, according to data from Lipper. Many IFAs are flocking towards the asset class as a result of a changing focus on investment themes post-RDR.

According to analysis conducted by Goldman Sachs Asset Management in June, 10.8% of UCITS funds are mixed asset, with the sector posting the largest net inflows in many recent months.

For Kathryn Koch, senior portfolio strategist and chief of staff at Goldman Sachs Asset Management, one of the factors that have driven flows has been the post-RDR environment, which has led IFAs to place an increasing focus on core skills of life and inheritance planning.

“We are finding the IFAs want to focus more on life stage and inheritance planning and are outsourcing asset allocation as a result of this,” she said.

“Disappointment with equity returns has also been contributory, since it typically dominates the risk in many investors’ portfolios and there has traditionally been a belief that asset managers can add value there.

“People also fear sleepwalking into a rising rate environment whereby ‘low risk’ bond allocations, which have done well over the last decade, lead to large losses,” she added.

As a result of these factors, wealth managers are increasingly choosing multi-asset classes over other options to bolster their portfolios. Below are some of their key picks.

Baring Multi Asset

James Davison, consultant at IFG Financial Services, said the wealth manager uses the Baring Multi Asset fund within some of its portfolios. “The team actively asset allocates between different asset classes, so the returns depend on it marking good asset allocation decisions,” he explained.

“The performance during the difficult summer of 2011 was impressive in this regard, while relative performance in the strong market over the last year has not been so good.”

However, he said he remains happy to hold the fund despite this recent wobble.

“We remain very comfortable with the fund. It aims to produce equity-like returns with lower volatility, and the managers have long experience running multi-asset mandates in the institutional market.”

Newton Real Return

For Mark Insley, managing director at Ascot Wealth Management, the Newton Real Return fund is the ideal absolute return multi-asset option, which caters for the both possible outcomes of an end to quantitative easing and equally for the scenario that QE is maintained.

“We particularly expect the Newton Real Return fund to have a good year, as a result of our global macroeconomic outlook,” Insley said.

“In our ‘stimulus withdrawal’ scenario, where we believe interest rates will rise and equity markets will be seriously impacted, the funds index shorts and defensive stocks should outperform, along with their emerging market positions and their long USD position.

“In our more likely ‘stimulus maintained’ scenario, the biggest risk to investors will be the massive inflationary pressures that such stimulus will exacerbate. In this scenario, the fund’s gold should outperform, and its higher yielding investments will also prove highly profitable.”

Standard Life GARS

Mike Deverell, investment manager at Equilibrium, said his firm uses the Standard Life GARS fund as a way to access a range of asset classes including equities, property, and fixed income, as well as more niche areas of the market.

“GARS is quite a unique fund in that it has so many different strategies and works in a different way to any other fund ,” he said. “The advantage of the fund is that it has so much variety , providing access to lots of different strategies through one fund – it is great for diversification.”

FC Lifestyle

For Andy Gadd, head of research at Lighthouse Group, the FC Lifestyle range is a core holding, and tries to capture market upside through short-term moves.

“The FC fund managers Rob Burdett and Gary Potter are good, with long-term experience of bull and bear markets,” he said. “The FC funds can have a 5% deviance, so are good for short-term tactical moves.”

Threadneedle Managed funds 3,4,5,6 and 7

Gadd said one of the most appealing factors about both the FC and Threadneedle ranges is that they are specifically managed to match Distribution Technology risk profiles.

“These are core holdings as far as I am concerned,” he said. “The Threadneedle range can have 10% deviance, so it provides a more aggressive alternative for short-term tactical positions and is always linked to Distribution Technology ratings.”


Saturday, August 31st, 2013 EN

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