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When assessing a Multi-Asset Manager?

An increasing range of funds

The number of multi-asset funds available are increasing, a recent Investment Association report places it as one of the bestselling sectors during the first half of 2017 with over 590 funds available.

The uncertainty of financial markets

Investment markets are unpredictable even at the best of times so advisers continually need to be vigilant with where they place their client’s investments. Not just at the asset allocation level, but also with their choice of fund managers.

With an increasing number of funds to review in order to understand the underlying holdings each constituent fund is vested in, this in-depth analysis can be both time consuming and resource heavy for advisers.

Do they have the resource and expertise to make informed asset allocation decisions?

Asset allocation is one of the most important investment decisions. It determines how portfolios will be positioned for long term and exactly how it can capture opportunities and respond to the risks.

To make macro asset allocation decisions does the multi-asset manager:

  • have a good understanding of  macro-economic and political developments as well as  be able to interpret the data to make suitable investment decisions. 
  • have in house modelling capability to process the data and develop possible emerging scenarios rather than rely on third party services. Thereby, able to identify trends and opportunities to give them a competitive edge.

What processes and controls are in place to meet fund objectives?

Proven ability and expertise to run the money for the specific asset class in line with the required style.

  • A well-resourced team with specialist expertise in:
  • capital market research,
  • alternative investments, 
  • investment strategy design, 
  • portfolio management,
  • liability management and historical analysis are part of the investment performance

Ongoing monitoring of the performance and risks is also a key factor. 

Do they have global presence and resources to conduct site visits to continually assess suitability and overall objectives of the multi-asset portfolio. 

A process of due diligence to cover both quantitative and qualitative factors.  Including:

  • performance measurement,  
  • holding analysis,  
  • role of cash and management of costs within the fund, 
  • regular reviews of the philosophy, processes, people and infrastructure to ascertain that they will continue to operate as envisaged by the multi-asset manager.

Can the manager react to changing market conditions?

Every fund has one past, however, it will have many possible futures. It is impossible to predict correctly a turning point in the markets, but it is possible to model potential future scenarios that could impact the asset classes held within the portfolio.

Advisers must be confident that  the multi-asset manager has the capabilities both at strategic asset allocation level and tactical asset allocation level to respond to changing market conditions as and when required.

Is the manager offering "real" value and returns?

Multi-asset funds by their structure require expertise and sizeable resources in order to perform their function as a macro asset allocator. The portfolio management set-up adds value for advisers that have neither the resource or time  to run their own multi-asset portfolio.

In addition multi-asset managers should have the skills and a track record to deliver alpha for the advisers and therefore merit the extra expense.

The above is not exhaustive but hopefully provides some food for thought when selecting a multi-asset manager.

© Prudential 2018