"It is a cost-effective way to obtain exposure to a diversified portfolio, minimising the impact of narrow market events and [reducing] volatility if constructed appropriately.
"In the UK, the appetite for low-cost multi-asset funds is gaining momentum, and due to the nature of fees eating away at returns, have a higher probability of outperforming costlier ones over a longer period.”
Historical parallels
The return of inflation has been the most significant shift for multi-asset investors, according to Chris Ellis Thomas, portfolio manager MyMap, BlackRock.
He says: “This shift parallels historical events such as the 2007 financial crisis, which underscored the necessity of comprehensive portfolio diversification, and the publishing of the Fame and French three-Factor Model in the early 90s.”
He adds that in light of these latest shifts, there are four key features that investors want from a multi-asset portfolio, which includes risk control, active management, broad exposure and cost efficiency.
Despite recent problems with multi-assets, David Lewis, investment manager on independent funds/Merlin team at Jupiter Asset Management, argues that it is important to consider the risks and returns over a full market cycle.
He says: “We had around 40 amazing years of falling bond yields into the middle [of] 2020, before yields rose dramatically into the middle of 2023.
"Since then, yields have drifted lower, and it is in this context that we have to assess the performance of multi-asset strategies over the last five or 10 years.
"Over a five-year timeframe, lower risk multi-asset strategies have not offered compelling returns, but this ignores the many years of attractive returns they produced before this period.
"Indeed, looking out to 10 years, the picture improves markedly. These cycles in investment markets mean that any risk asset should be considered over the long term and not for short-term results.”
