Existing clients can use these links to log in to the Infinity dashboard. Not a client? Why not get in touch to find out about our services.
Over the last two decades the financial landscape has undergone significant changes which have had a profound effect on how small investors engage with the market. One big trend is a move towards a mix and match approach to investing known as the multi-asset fund.
Traditionally many investors were fixed on stocks and shares and would also stick to investing in their own country. Early multi-asset investing took the form of ‘balanced funds’ which mixed bonds and equities in equal proportion. Multi-asset investments take the principle a step further by mixing diverse investments within one fund. This diversity includes stocks from different sectors and different geographical markets as well as different types of assets including equities, property, infrastructure, currencies, commodities and derivatives. This approach is widely believed to reduce volatility, and therefore risk, because different asset classes will perform well at different times, the good performance of one asset class at any time balancing out the less good performance of another.
The rise of the multi-asset fund is at least in part due to the global financial crisis – the popularity of these funds hit its peak in 2010. In the aftermath of the crisis investment managers were forced to take a long hard look at their results. Investors were not content to hear that their investments lost less than the benchmarks they were being judged about if at the end of the day they were losing money. What all investors want is very simply for their investments to be worth more at the end of the day than they were at the beginning and for many this was not happening.
Changes brought in by the Financial Conduct Authority at the end of 2012, largely in reaction to the crisis, also played a part. They introduced the retail distribution review at the end of 2012 bringing commission-based selling to an end. Since the retail distribution review the best financial advisers have shifted their focus from building portfolios to understanding the requirements of their clients and setting investment goals but leaving the actual investment to others who are more skilled in managing investments. This has acted as a catalyst to the development of multi-asset funds.
Multi-asset funds, also known in the industry as ‘set and forget’ products are particularly well suited to small investors and the trend is largely welcomed in the industry. There are many different kinds of product which fit the profile of a multi-asset fund. Some stick fairly close to the early balanced fund model mixing equities and bonds but others diversify far more with additional asset classes in varying proportions. Diversified growth vehicle funds aim to reduce volatility which at the same time producing similar returns to equities while absolute return funds attempt to deliver positive returns whatever the market is doing. They do this by using derivatives to balance potential falls in the stock market and have been described as hedge funds for retail investors.
As the popularity of the multi-asset fund has risen, a new breed of investment manager skilled in asset allocation has emerged. It is claimed that this approach focuses much more on the needs of the client rather than on a particular market by mixing extremely diverse investments within one fund. Those investment managers who can adjust the proportions of the assets within a portfolio to generate returns within certain risk parameters are in high demand. Although asset allocation is key to the success of these funds, this still needs to be balanced with careful selection of individual stocks.
So are multi-asset portfolios the solution for investors looking for an off-the-shelf product? Experts have warned that they can be expensive and it can be difficult to compare one with another as they are not benchmarked to a particular index as shares are. This is an area the Investment Management Association is working on given that multi-asset funds look to be more than just a passing fad in the financial industry.
In an attempt at transparency, many of these funds will state their target performance compared to a benchmark rate such as the Libor. If, for example, they aim for a return of Libor + 2% investors can easily judge whether the fund has succeeded or not. If not, they may choose to move their money elsewhere.
Other funds opt for risk rating as a way of benchmarking. This system has evolved since the financial crisis as the industry attempts to become more accountable to its clients and match their risk tolerance to suitable products however there is some controversy surrounding the growing use of this system. It involves an external firm giving a product a rating from one to 10 to indicate its expected volatility so that investors can understand the level of risk involved in that product. Risk targeting may also be used. This takes the risk rating process a step further by simulating outcomes with actual figures. Again, this system has its detractors who warn that boiling risk down to one single number is gross oversimplification and certainly not an infallible system.
In spite of the issues with measuring their success, multi-asset funds look not only set to stay on the financial scene but could see a huge rise in popularity in the UK with the 2015 pensions revolution giving retirees freedom of choice as to how they use their pensions. Buying an annuity will no longer be obligatory and the growing number of over-65s will be looking for other ways to invest their pension savings. Asset managers are already attempting to woo the grey pound with multi-asset funds targeted at retirees and the spring will see the launch of a whole host of similar products when the new pensions legislation comes into force.
Potential investors need to know that these products do not guarantee income and although volatility is reduced there is still a level of risk involved. The fact is that no computer system, however sophisticated, can predict investment outcomes, however a well-managed multi-asset fund will be constantly reviewed and adapted as necessary to keep pace in an ever-changing investment environment thereby minimising risk.
This is one reason why Infinity have selected Tilney Bestinvest as their investment partner. Tilney Bestinvest is a multi award-winning investment company which offers a range of multi-asset portfolios (MAPs) with different risk parameters ranging from aggressive to defensive to suit all investors from the most cautious to those with the highest tolerance to risk. The performance of these funds is carefully monitored and asset allocation is adjusted based on data produced by a dedicated research team.
If you are looking to invest and think that a multi-asset fund might be the solution for you, why not talk to one of our financial advisers? They will discuss your tolerance to risk in detail with you and can recommend a multi-asset portfolio to suit you.
This Site and the Content are not directed at or intended for distribution to any person (or entity) who is a citizen or resident of Hong Kong (or located or established in) any other jurisdiction where the use of the Site would be contrary to applicable law or regulation or would subject Infinity Financial Solutions Limited to any registration or licensing requirement in such jurisdiction.
Persons (or entity) who is a citizen or resident of Hong Kong please click on the link below to access our Hong Kong Site.