Matt Hollier, head of investment product at Heartwood, says the trend towards multi-asset income was also apparent the year before, with a number of clients expressing a “need for regular income of a predictable level [with] the volatility or the risk attached to that being well-managed so they don’t run out of capital or suffer significant drawdown on their capital”.
The research supports this, with 59 per cent of advisers identifying a fund’s “ability to generate a stable monthly income” as their “must-have factor in choosing an income-generating investment”.
Pension freedoms may have had an impact on these statistics. With more and more people seeking steady income opportunities for retirement outside of pensions, multi-asset investment strategies are increasingly recognised as viable opportunities.
Sedulo’s Mr Lindfield attributes this rise in popularity to the nature of multi-asset products. “If you have a static model or you have a model built up of individual funds, then there are far more things to go wrong in using that type of investment strategy where you’re fund-picking, whereas a multi-investor will change its asset allocation weightings according to their tactical overlay decisions because of what’s coming up.”
But of note is the fact that two of Vanguard’s passive LifeStrategy funds feature among the best-mixed investment performers of the past five years. This suggests that many active multi-asset funds’ attempts at tactical asset allocation have been less effective than a portfolio that has a set weighting to equities and bonds, and expresses that view via passive funds.
Vanguard’s lower fees are also in its favour. Keeping costs down for fund managers and investors, is of growing concern when it comes to multi-asset investing, especially in the wake of the FCA’s recent asset management market study interim report. According to the regulator, weak price competition is rife in a number of areas in the asset management industry. It emphasised that this has a significant effect on investment returns, although it should be noted that all returns in Table 1 are net of fees.
Alex Farlow, head of risk-based solutions research at Square Mile, says: “I think the industry has become more focused and concerned with cost, and obviously trading costs are one underlying cost [which may lead to] trading less to keep costs down. Some of the new global multi-asset products are also keeping cost down by insourcing,” he adds.
Mr Farlow is referring to the practice of some multi-asset fund of funds only investing in products run by their own company. However, contrary to popular belief, fettered funds have beaten their unfettered peers over one, three, five and 10 years across each of the four mixed asset sectors, according to figures from FE.
