Multi-asset needs to re-think its USP

An uncertain market environment provides enough difficulty for multi-asset funds already, but as well as working out how to position their portfolios between equities and bonds, the sector also has a deeper challenge. It is to do with getting its message across.

The ‘loudest’ message associated with multi-asset funds is that these strategies can deliver equity-like returns but with lower volatility.

Consequently, investors and would-be investors can’t help but compare multi-asset strategy returns with those of equity markets. Equities are in a bull market; multi-asset returns almost inevitably look relatively poorer by comparison.

Multi-asset funds should not generally be compared to equity market returns – especially during a bull run!

Given the diversity of benchmarks and objectives that multi-asset funds have, it is right only that a sub-set of multi-asset funds be compared to equity funds. And even when doing this, the comparison should be over the longer term.

Many multi-asset funds try to outperform cash rather than equities. This is an important point when inflation (erosion of cash’s purchasing power) is one of the biggest problems for savers and investors, and it is likely to be a major issue for the longer term as this period of unusual monetary policy extends.

The Lens would argue that the inflation challenge is well understood by many knowledgeable investors, but that the role of multi-asset funds in confronting inflation is much less well known.

Negativity has surrounded coverage of multi-asset funds. There have been outflows from the sector and sometimes lackluster returns. To dispel the negativity, the industry must explain its role better.