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Multi-asset funds

The Basics

What is a multi-asset fund?

Let’s break it down. First off, a ‘fund’ can be thought of as a ready-made basket of investments, managed for you by an expert. Funds often come in themes, like collections of shares in sustainable companies, properties in America, or bonds from European governments. Some investors pick and mix about 8–20 funds and make a portfolio.

Not everyone is confident blending this mix of funds. If that's you, you could consider a multi-asset fund. Imagine a set of Russian dolls – a multi-asset fund is the 'next doll up', aggregating a collection of different funds into one.

These funds typically offer you a wide range of shares, bonds, property and other types of investment – usually from all over the world – in one simple package. The idea is to make your investment portfolio as diverse as possible, which helps to spread your bets around. That way, if one of your investments falls flat, only a small portion of your money is affected. It’s less risky, requires zero investing knowledge, and takes very little effort as an expert runs it for you. Who said investing had to be difficult?

Is It Right For Me?

The Numbers

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So. For example – we've used an Architas multi-asset fund to show you how having a broader spread of investments can make sense.

The illustration above compares a medium-risk multi-asset fund, Architas MA Active Intermediate Income, to investing in just UK shares over the last 5 years.

The fund is made up of 40% bonds and 53% shares, with the rest in property, cash and alternatives. Only 18% of the fund is UK shares. This sort of fund will typically have done better than just a collection of UK shares – the UK has not had a great run. So spreading your bets around will have paid off.

It's typically a good idea not to have all your money in one market or sector – and get a broad mix of regions and investments. (Of course this can also work the other way, for example tech stocks have soared this year – but it's a question of minimising risk in the absence of a crystal ball.

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The one choice you do have to make with these funds comes at the very beginning, and that involves setting your risk level, which determines what you’ll invest in.

We’ve used 2 funds from Architas to explain this. If you have a low appetite for risk, most of your money will be allocated to bonds or ‘gilts’. These are basically loans to the Government – they won’t shoot the lights out but they won’t jump up and down in a really volatile way either. Slow and steady.

If you have a higher appetite for risk then you can see that you have a lot more shares in the mix – these should make more over a 5+ year period but will jump up and down more so not for the faint-hearted.

NB Risk here does just mean volatility – not being a cavalier gung-ho wally! It depends on timeframes but sometimes the highest risk options can also be the most sensible!

Check out how an everyday investor explains it

The Benefits

  • Access to a wide range of investments in one simple package

  • Spread your money around multiple countries and markets

  • Beginner-friendly – simply set your risk preference

  • Leave it to experts to tweak and update over time

The Detail

CHOOSING YOUR MULTI-ASSET FUND

Risk level

There are different types of multi-asset fund, but many will come with a handy indication of the type of investors that should consider them. For example, they might be a ‘cautious’ investor. This would only have a small amount in the stock market, with the remainder in less volatile investments such as government bonds. More ‘adventurous’ or ‘aggressive’ options may have a higher weighting in the stock market. You can also get options that pay an income. Once you are up and running with a multi-asset fund, you don’t need to do very much. You can just keep topping up and ignore it.

Active or passive

Most funds in the market are what we call ‘active’. An active fund manager by definition thinks he or she is smarter than the average investor. They think they can spot a bargain. Identify the region that is about to go belly-up. So they pick and choose. If you buy an active fund which invests in shares, you will usually pay a fee to the fund manager of about 75p-95p for every £100 you entrust to them.

Passive funds are devoid of ego and opinion. They are the well-behaved end of the fund market. Noone makes a call on whether Share A is better than Share B. They simply follow what we call an index, or a list of shares or bonds in any given market. They buy them in proportion to their size and no judgement calls are made. If you buy a passive fund which invests in shares, you will usually pay a fee to the fund manager of about 8-12p for every £100 you entrust to them. It’s a lot cheaper because it’s run by a computer, not an expensive human. The jury is out on which is best. But by definition passive funds will return the average of any market. Some active funds will smash it – others will underperform and charge you for the privilege.

THE MULTI-ASSET CHALLENGE!

Right then – you must be a multi-asset expert by now. No? You’d be surprised how much you retain.

Check out the following video, in which investors explain what it means to save into a multi-asset fund. Then have a go yourself: explain a multi-asset fund to one of your nearest and dearest. Teaching others is a great way to retain information.

CHOOSING A FUND

Some of the biggest global names to offer these include BlackRock and Vanguard. Also very popular in the UK are Fidelity, Jupiter and Standard Life.

Architas has a range of active and passive multi-asset funds and sponsored our video content on these pages. The UK part of Architas has now been acquired by Liontrust. You can read more about their multi-asset funds here https://www.liontrust.co.uk/what-we-offer/multi-asset/funds