Each multi-asset fund will or should contain a sufficiently wide range of investments. This is particularly important for diversifying and spreading investment risk when using a multi-asset approach for investors with smaller amounts of capital. One example would be somebody wishing to add to their Isa investment holdings for the tax year and willing to take a level attitude to risk and a medium-term view.
Advisers should have a procedure to go through with their clients to check which fund is suitable. A useful guide is for advisers to look at the IMA sectors Mixed Investment 20-60 per cent and Mixed Investment 40-85 per cent as a starting point, with the 20-60 per cent sector funds offering a potentially lower risk and volatility than the 40-85 per cent funds. Within each of these sectors, due diligence and fund selection criteria must be applied to identify funds that come somewhere near matching the client’s underlying risk profile.
Consider an investor looking for capital growth, who accepts and understands the need to take a wider global view over the medium term. A good example of the Multi-Asset Fund sector is CIS Sustainable World Trust with the sector breakdown shown in Table D.
Table D
International Equities | 58.59 |
UK Equities | 24.65 |
UK Corporate Fixed Interest | 14.25 |
Money Market | 1.81 |
Global Corporate Fixed Interest | 0.39 |
Sovereign Bond | 0.31 |
Source: FE Trustnet, 31.08.17
This illustrates how the sector breakdown of the fund matches the underlying objective – to deliver long-term capital growth from a wide range of assets spread across the world, with a focus on equities, but including a modest exposure to cash and fixed-interest instruments.
The use of multi-asset funds within a portfolio also allows the adviser to help an investor access a wide range of investment expertise and fund management skills and in turn work towards potentially achieving their investment objectives.
The use of a multi-asset approach for retail investors lets advisers provide a route to investment that gives clients fair value; access to a wide range of investment expertise; diversification and clear well-thought-out asset allocation to invest across a spectrum of asset classes and sectors that offer good potential for investment returns. Multi-asset investing is not the Holy Grail, nor is it a one-stop solution for portfolio construction, but it should be considered a key piece in the investment jigsaw.
Whatever approach an advisor takes working with and advising clients on investments, the fundamental steps highlighted earlier in bullet points remain true. The investment solutions in the marketplace continue to develop and morph in response to factors influencing our world economies. All advisers need to keep an eye on market developments and how this impacts the investment advice they give.
Nick McBreen is an IFA at Worldwide Financial Planning
