Multi-asset funds are growing in popularity as investors seek a one-stop shop for their money. They have the freedom to invest wherever they see fit in order to meet their objectives: across equities, bonds, property, gold and many other assets.

Such a broad remit in a fund is understandably attractive to investors at a time when markets have been difficult to predict. But the multi-asset fund space is not an easy one to navigate – there are a whopping 153 funds to choose from in the Mixed Investment 20-60% Shares sector alone and 96 have a 10-year record.

What’s more, this is just one of three sectors into which multi-asset offerings can fit, and the remits and performance of each can vary greatly, showing how hard it can be for investors to find the best choice for their needs.

HOW DO THEY WORK?

The criteria for a fund to be part of the Mixed Investment 20-60% Shares sector, as the name might suggest, is that the portfolio should have between 20% and 60% of its assets invested in equities. That wide range means the group contains funds whose objectives and investment strategy vary greatly.

While it is certainly positive that investors have so much choice, this can make it difficult to compare the funds fairly. Those with significantly higher returns may be taking a lot more risk to achieve their outperformance and the funds at the bottom of the pack may not look as appealing but may be meeting their remit by producing smaller but steady returns.

What's your risk appetite?

AJ Bell offers a range of passive multi-asset funds which act as ready-made portfolios and match different levels of risk appetite. For example, VT AJ Bell Passive Moderately Adventurous (byw8vl7) has a c75% weighting towards equities, 18% of assets in bonds, 4% in cash and 3% in property.

HOW DO YOU PICK A FUND?

When choosing a multi-asset fund, it is vital that you look at the aim of the fund and how it sets about achieving its goals, including how much risk the manager will take.

One of the best ways to whittle down such a great number of funds is to look at their track records over an entire stock market cycle. 

Analysis by AJ Bell shows the performance of funds in the Mixed Investment 20-60% Shares sector which have been around at least 10 years.

Simon Molica, fund manager at AJ Bell, says: ‘For a good multi-asset strategy I would expect to see an experienced fund manager or team running the mandate. These mandates have such a large opportunity set that it is also good to see when a team has access to specialist knowledge within their firm.’

He adds: ‘We want to see a well-defined and articulated process and evidence that the manager has a good eye on risk monitoring so that there are no unintended risks influencing returns in the fund.’

WHICH FUNDS HAVE DONE WELL?

The top performer of the group is Premier Liberation V (B675ST4), which has returned 175.8% over the past decade and produced an annualised return of 10.7% over that period. At the other end of the spectrum is Miton Cautious Multi Asset (B0W1V85), which has returned 56.6% and produced an annualised return of 4.6%.

Premier Liberation V is a fund-of-funds, meaning that the manager selects other funds to invest in rather than investing directly into equities and bonds. It is part of a range of four funds which are managed to volatility targets and is the second least volatile of that range.

Some 27% of the fund’s assets are in UK equities, through funds including Evenlode Income (BD0B7D5) and JOHCM UK Opportunities (B95J5C1). It also invests in Japanese, US, Asian and emerging market equities as well as a number of bond funds including Royal London Short Duration Credit (BJ4KW80), Baillie Gifford Strategic Bond (0594774) and iShares UK Gilts All Stocks Index (B89VCR0), a UK Government bond tracker fund.

Highlighting just how different funds within this sector are to each other, the Miton Cautious Multi Asset fund is not a fund-of-funds as the manager instead chooses their own investments.

With a cautious approach, it is unsurprising that the top 10 holdings within the portfolio include US government bonds and gold bullion – some 31% of its £507m of assets are in bonds and 7% in cash. It also invests in big US stocks such as Microsoft and Paypal.

HAT-TRICK FOR PREMIER

Premier Multi-Asset Distribution (B40RNW1) and Premier Multi-Asset Monthly Income (B7GGPC7) are the second and third best performing funds in the group over the past decade, making it a hat-trick for asset management group Premier. These funds, which have a focus on producing a reliable income, have returned 170.2% and 164.6% respectively over
10 years.

The lowest returns among the group are dominated by funds with a cautious focus. MGTS Future Money Real Value Fund (B89JN48), for example, has the objective of beating inflation to maintain the real value of assets.

Around 11% of its portfolio is in cash and money market investments and more than 50% in bonds and fixed income investments. It has produced an annualised return of 5.5% and a cumulative return of  71.7% over 10 years.

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