James Bateman, Chief Investment Officer, Multi Asset, Fidelity answers two key questions about the rise of multi asset investing
Why has multi asset investing boomed since the early 2000s?
Over the last 10 years, multi asset funds have seen a significant rise in popularity as a consequence of RDR, changes in pension freedoms and a greater pressure on advisers to justify their fees and demonstrate value to their clients. The IA Mixed Investment 20-60% shares sector has been the most popular in terms of net retail sales four times over that period.
The universe has also seen a considerable expansion with a complex array of investment products now available, each designed to deliver against different outcomes and risk appetites either investing directly in securities or via a fund of funds structure.
There are 551 multi asset funds across the three core IA sectors and they can all vary in terms of their investment process, where they invest and the risk profile they are adhering to. This paints an overwhelming picture for the adviser making it difficult to compare strategies like for like even within the same IA grouping as one fund in the group may look entirely different and exhibit an entirely different risk profile.
So it's important for advisers to get under the bonnet of a strategy and understand the investment process, costs and long term performance of a fund.
91% of advisers currently recommend multi asset products to their clients, according to research by Fidelity and Professional Adviser. And the trend is set to rise. Why do you think this is?
Outsourcing to a specialist such as Fidelity enables advisers to access a breadth of expertise and experience that they otherwise wouldn't have along with the scale of the research capability afforded by a bigger investment house. Essentially it's a ‘one-stop shop' for advisers to access a ready-made diversified portfolio. This, in turn helps with the management of risk and limitation of capital drawdown so the focus is on advisers to align fund risk with investor risk:
- Particularly useful for investors with smaller portfolios to achieve diversification and spread risk across assets and regions in one fund - cost-efficiencies.
- For advisers with limited resources to actively allocate, outsourcing to a multi asset provider makes sense so they can dedicate their value-add to clients by focusing on core financial planning rather than making all the investment decisions and focusing on the underlying asset allocation decisions.
- We believe the growth trajectory of funds in the multi space seems set to continue as the structural drivers remain in place and pressure on costs continues. Demonstrating value for money, with attractive long-term risk-adjusted returns and cost transparency will be a key focus for multi asset providers going forwards.
