With many employees likely to settle for their default option once the auto-enrolment pension plan kicks in, IFAs fear many young people starting work will walk blindly into underperforming funds. 

Experts agree that a cautious or balanced fund would suit a long-term pension investor best, as these aim for competitive returns while also protecting against the downside. 

While cost is of course an important factor, there are plenty of the traditionally more expensive multi-asset funds that have beaten their benchmark net of fees time and time again. 

According to FE data, there are 10 multi-asset funds* that are not only top-quartile in their respective sectors over three, five and 10 years, but across all four multi-asset sectors. 

Here are three of the best: 


Jupiter Merlin Income

Jupiter Merlin Income is among the highest-profile multi-asset funds on the market. It is a fund of funds, meaning it invests in other investment portfolios rather than individual companies and bonds. 

Funds of funds have an extra layer of diversification as the portfolios they invest in have already spread the risk themselves. This also means they are more expensive than traditional portfolios, though, as they have an extra layer of charges. 

According to FE data, the £3.4bn fund has a total expense ratio (TER) of 2.33 per cent, which is well above average. 

However, it has proven good value for money, significantly outperforming its IMA Mixed Investment 20-60% Shares sector average and FTSE APCIMS Income Portfolio benchmark over one, three, five and 10 years after fees. 

Performance of fund vs sector and index 

Name	1-yr returns (%)	3-yr returns (%)	5-yr returns (%)	10-yr returns (%)
Jupiter Merlin Income	3.69	40.15	22.34	106.05
FTSE APCIMS Stock Market Income Index	3.75	40.1	20.83	83.37
IMA Mixed Investment 20-60% Shares	-0.79	27.07	6.14	52.82

Source: FE Analytics

The fund’s consistency is even more impressive than its cumulative record: according to FE data, it has beaten its sector average in each of the last 12 calendar years. 

As its name suggests, the fund also aims for a competitive level of income. According to FE data, it is currently yielding 3 per cent. 

Jupiter Merlin Income is headed up by three FE Alpha Managers – John Chatfeild-Roberts, Pater Lawery and Algy Smith-Maxwell – who have all been on the team since the late 1990s.

The FE five crown-rated portfolio has a minimum investment of £1,000 and is available on the vast majority of platforms. 


Aberdeen Multi Asset

The FE five crown-rated Aberdeen Multi Asset fund is a more traditional multi-asset portfolio, although it does hold some funds and investment trusts. With a TER of 1.07 per cent, it is much cheaper than its Jupiter rival. 

While it has fallen short of Jupiter Merlin Income over five and 10 years, it has a better record over three, delivering 53.12 per cent compared with Jupiter’s 40.15 per cent.

The fund has significantly beaten its IMA Mixed Investment 40-85% Shares sector average in the short-, medium- and long-term, although it has been more volatile in the process. 

Performance of fund vs sector over 10-yrs

 

Source: FE Analytics

Like all of Aberdeen’s portfolios, Multi Asset has a team approach. This is seen as a big advantage by many, as the fund won't be prone to mass outflows if a star manager departs. 

The team currently has a significant stake in infrastructure, with 3i Infrastructure and John Laing Infrastructure both appearing in its top-10 holdings.

The fund only achieved its 10-year track record back in June. It has a minimum investment of £500. 


Baillie Gifford Managed

Another industry favourite that could well be on your pension provider’s books is Baillie Gifford Managed, which invests in a mixture of equities, bonds and other Baillie Gifford portfolios.

Like Aberdeen Multi Asset, it has consistently beaten its IMA Mixed Investment 40-85% Shares sector. Aberdeen has a slightly better record over three and 10 years, though Baillie Gifford comes out on top over five, with returns of 19.94 per cent compared with 13.55 per cent.  

As the team only invests in funds run in-house, it cuts down on costs, which is why it has a TER of only 1.56 per cent. The Baillie Gifford Investment Grade Bond and Emerging Markets Bond portfolios are currently its two biggest holdings, though the likes of Imperial Tobacco and BG also appear in its top-10.  

Again, the fund adopts a team approach, which has been the case ever since its launch almost a quarter of a century ago. 

It has four FE crowns and a minimum investment of £1,000.


The seven other funds that are top-quartile among all four mixed-asset sectors over one, three, five and 10 years are Threadneedle Navigator Adventurous Managed, Threadneedle Navigator Growth Managed, Threadneedle Navigator Growth, Jupiter Merlin Growth, McInroy & Wood Balanced, McInroy & Wood Income and Margetts Venture Strategy.   

*These funds are available for those using a Self Invested Pension Plan (SIPP). Many pension providers offer out-of-house options, which may include those mentioned above.