multi asset funds

Multi-Asset Funds

What is a Multi Asset Fund?

Multi-asset funds are made up of a combination of asset classes, including equities, bonds, and cash, and are designed with different asset allocations to create a range of low-to-high risk offerings.

For example, a low-risk or conservative fund might invest heavily in bonds, while a more aggressive fund might focus on shares or property.

They’re looked after by fund managers who review and rebalance the asset mix regularly and employ a range of strategies that aim to manage risk and optimise growth.

What’s the difference between asset classes?

Equities (also known as shares) are issued by a public limited company and traded on the stock market. When you invest in equities, you buy a share in a company and become a shareholder. Equities aim to create profit through capital growth (when the share price increases), or you can build income via dividends.

Bonds (also known as fixed income) are issued by companies and governments as a way of raising money. It’s an I.O.U effectively, that aims to provide a regular income stream, over a fixed period. It also comes with a promise to return investor capital on a set date in the future.

Cash is usually held in a bank account where interest can be gained. To optimise growth, cash funds use market power to get better interest rates than bank accounts typically offer. They can also invest in very short-term bonds lasting one year or less.

Why choose multi-asset funds?

The key objectives of multi-asset funds are to increase diversification and reduce risk, creating balance and avoiding the volatility that can come from having all your eggs in one basket.

For example, a multi-asset investor might hold a mix of bonds, cash, and property, while a single-class investor might only hold stocks.

As a result, the benefit or loss of any market movement for the single-class investor can be amplified, while the multi-asset investor might experience more moderate gains and managed losses, by spreading risk and aiming to reduce the impact of any major downward turn.

Of course, no investment comes with a guarantee, making it even more important to choose funds and strategies that take account of your appetite for risk and aim to keep you within your comfort zone.

Managing risk with multi-asset funds

Multi-asset funds invest in a range of assets, countries, and market sectors, diversifying your investment across many different asset classes.

The idea is that these different asset classes behave at least partly independently of one another so that a drop in one asset class will not put all your investment in danger. For example, when equities drop in price, this may be offset by a rise in prices of alternative assets.

It also means you can leave all the managing and monitoring to the fund managers, who will adjust the asset allocation of the fund depending on what is happening in the markets.

Funds that specialise or concentrate their investment in specific regions, sectors (such as emerging markets or smaller companies), or in a smaller number of shares can result in greater fluctuations in value. Funds that invest in a wide range of sectors or shares generally carry less risk as they are well diversified.

Avoid the trap of trying to time the market

A single-asset class might outperform during a particular period, but no asset class will outperform every period.

The diversification of a multi-asset fund helps with timing too, removing the impossible task of trying to guess which way the market will go and helping investors ride out peaks and troughs with more shelter.

Warning: Past performance is not a reliable guide to future performance.
Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: These funds may be affected by changes in currency exchange rates.