Solving the big three problems of conventional multi-asset funds
By Ben Peele - November 11, 2021
Launching what must seem like the 974th multi-asset fund (MAF) in the UK market was going to be of little interest to the financial advice profession unless it was somehow different. How about a range of MAFs that have been specifically designed to solve the three most common dislikes from clients (and advisers) about using MAFs?
One of the benefits of coming later to the MAF party is that we were able to observe what works well and what could be improved. Speaking with advisers there seemed to be three main reservations clients have about investing via Multi-Asset Funds. These are:
Clients don’t like being put into a simplistic risk bucket like Cautious or Balanced. Also, the regulator is not keen on a “one size fits all” approach either.
Perceived lack of diversification – when a client logs onto the platform and sees that their life savings appear to be invested in one fund, they can understandably be concerned about concentration risk. And yet look through to the underlying holdings to evidence diversification hasn’t been done well by the major MAF providers.
Very few of the major MAF players take a whole of the market, best of breed approach to selecting sub-managers for their MAFs. Instead, they use their ‘in-house’ investment managers and funds (it is no coincidence that this is a setup that generates maximum revenue for the provider). Many clients don’t like this lack of independence and exposure to just one fund group.
Other issues also exist, some of which are highlighted in a recent Money Marketing article that asks “Have multi-asset funds truly changed?”
Armed with the issues that most concern clients (and advisers), our investment team took on the challenge to solve them.
Here’s what we’ve done:
Rather than putting clients into simplistic risk buckets, our MAFs can be blended to provide a tailored solution. Initially it was possible to blend our three Core MAFs to match the risk score of a client and we have recently launched an additional two Allocation (passive implementation) MAFs to tailor the cost of the portfolio. Next year advisers will be able to further customise portfolios as we launch the MAF versions of our very popular ESG portfolios, Sustainable World. This puts the adviser firmly in the driving seat when it comes to developing an investment solution that exactly meets their clients’ needs.
The best way to tackle the ‘lack of diversification’ concern is to make it easy for advisers and their clients to see all the different underlying funds that are wrapped in the MAF blend. We can easily do this using our WealthExplorer™ software and also offer graphic illustrations of how the client’s money is spread across asset classes, geographies and currencies.
We don’t use any ‘in-house’ funds within our multi-asset funds. We are proudly independent and are free to choose funds from any provider globally that we believe (after meticulous research) offer the best in terms of possibilities, value and governance.