Multi-asset investing

What is multi-asset investing?

Multi-asset investing is an approach involving the blending together of different asset classes with a view to improving performance and managing risk. Rather than buying individual funds which focus on a specific asset class, region or sector, you can buy individual multi-asset funds containing an appropriate blend of different types of assets. Multi-asset fund's objectives can be risk oriented and some fund providers will have a series of funds with different risk levels. In these funds, the lower risk options will have greater exposure to lower risk assets such as cash and bonds and funds on the higher risk scale will have greater exposure to assets such as equities.

Multi-asset funds can be a good entry point to investing for less experienced investors for the following reasons:

  • Simplicity – they can offer a one-stop investment solution so you don't need to build your own portfolio
  • Time savings – no need to research individual assets as the asset allocation is decided for you based on the fund's objectives
  • Exposure to a range of assets – spreads the investment risk as different assets may perform differently based on the economic environment
  • Ongoing management by a professional - the fund manager will rebalance the assets to ensure the fund remains in line with its objectives and any risk parameters
Whilst multi-asset funds take a lot of the research and decision making process away from you, it is still important to regularly review your investments to ensure they remain right for your own goals and tolerance and capacity for risk.

What is a multi-manager fund?

A multi-manager fund is a type of multi-asset fund which invests in other funds rather than individual assets. Professional managers hand pick a variety of funds that they believe are the 'best in market'. Their aim is to select strategies from leading managers across the fund management industry on the basis of their assessment of the fund manager’s ability to do well in the prevailing investment environment. They would also bear in mind how each fund would complement each other within the portfolio.

There are two types of multi-manager funds; those that invest in a range of other funds managed by different fund managers, which are called Funds of Funds (FoF), and those that appoint external managers with specific expertise to invest separate tranches of the portfolio; these are called Manager of Managers (MoM) Funds. Due to these additional resources, these funds may have higher fund management charges.

The aim of these funds is to add an extra layer of diversification either through holding funds that have already gone through a process of diversification themselves, or by segmenting a portfolio and outsourcing its management to individuals who have been identified as having proven experience in a particular area.