In November, mixed-asset funds were the second best-selling asset class with net retail sales of £1.2bn, according to the Investment Association (IA), the trade body that represents UK investment managers. The second and fourth best-selling IA sectors were Mixed Investment 20-60% Shares, with net retail sales of £305m, and Mixed Investment 40-85% Shares, with net retail sales of £255m.
Five best-selling IA sectors
| IA Sector | Net retail sales in November 2017 |
| £ Strategic Bond | £1.5bn |
| Mixed Investment 20-60% Shares | £305m |
| Europe excluding UK | £291m |
| Mixed Investment 40-85% Shares | £255m |
| Global | £205m |
Source: Investment Association
And asset managers are responding to the demand with new launches. These include LF Miton Balanced Multi Asset Fund, which is launching on 29 January. This fund will aim for equity-like returns over the long term with an ability to temper downside. At launch it is expected to have around 70 per cent of its assets in equities, 20 per cent in bonds and 10 per cent in cash. The equity portion's largest geographic exposures will be Japan, Europe and Asia.
The fund will invest in individual securities rather than other funds with the aim of keeping overall charges low. It will offer two share classes with annual management charges of 0.5 per cent and and 0.75 per cent, with ongoing charges capped at 1 per cent and 1.5 per cent.
SYZ Asset Management has launched a sterling version of its Oyster Diversified Fund (LU1468490914) for UK investors. This is aimed at investors wanting a fund with a higher risk/return profile and a regular income stream, and will be available on platforms including AJ Bell and Charles Stanley Direct. The fund will not charge a management fee until 1 March 2019 and its managers estimate that it will have an ongoing charge of 0.22 per cent to 0.24 per cent.
And J.P. Morgan Asset Management is targeting over £150m with JPMorgan Multi-Asset Trust's initial public offering at the end of next month. The investment trust will aim for a long-term total return of 6 per cent a year net of fees via a combination income and capital growth, including an initial annual dividend yield of 4 per cent paid quarterly. But it will aim for a typical volatility only two-thirds of that of a traditional equity portfolio.
JPMorgan Multi-Asset Trust will invest in assets including equities, emerging market debt, high-yield bonds and global credit, and possibly alternatives such as infrastructure, across more than 40 geographies.
The trust's management fee will be 0.65 per cent of net asset value up to £250m and 0.6 per cent on assets above that. The offer closes on 26 February.
JPMorgan already runs a number of multi-asset funds but this will be the first one in an investment trust structure. "Investing in less liquid areas of the market such infrastructure plays well to the strengths of an investment trust's closed-ended structure," explained Simon Crinage, head of investment trusts at J.P. Morgan Asset Management.
Part of the reason for this trust's launch is to offer a rollover option to shareholders of JPMorgan Income & Capital (JPI), a split capital trust scheduled to wind up on 28 February. But the broader trend towards multi-asset funds is being driven by financial advisers who are increasingly outsourcing their investment decisions, in the wake of more onerous regulation, according to Darius McDermott, managing director of Chelsea Financial Services.
Multi-asset funds can be useful for self directed private investors, particularly those who do not have the time or knowledge to pick their own investments. They are also useful as a core holding in your overall portfolio but there are downsides investors need to be aware of.
"It can be more difficult to benchmark multi-asset funds," said Laith Khalaf, senior analyst at Hargreaves Lansdown. "A normal way to benchmark a fund would be to compare it with its sector, but [multi-asset] sectors are quite diverse. So, for example, in the Mixed Investment 20-60% Shares sector, you can have some funds that are very conservative with the least amount possible in equities, alongside other funds that are right at the top of equity spectrum."
You should also consider how a multi-asset fund makes its returns.
"The funds we like the best in this space are those where stock selection is as important as asset allocation," explained Mr Khalaf. "Our experience suggests asset allocation is more an art than science and if something goes wrong, [it's good to have the stock selection] to fall back on to drive returns. But multi-asset funds are often focused on asset allocation and stock selection takes a back seat, which means they end up relying on one set of return drivers."
