Multi-asset funds for your portfolio

The desire to spread investment risk, as well as to bypass low interest rates, has been the main driving force behind the growth of multi-asset funds.

Such vehicles tend to invest across a variety of diverse asset classes and fund managers. As a result, investors avoid being exposed to the risk of market gains or losses in just one sector. The main goal is for investors to achieve capital growth through having the better performers offset the weaker ones.

The main advantage of multi-asset funds is the diversification they offer, which in turn allows investors to take minimal risk and volatility. Investors are able to put their money in just one fund and achieve instant diversification without having to allocate their capital in multiple options. The diversification also benefits those who want to invest small amounts of capital, those who do not have an IFA, and those who do not want to, or are unable to, have a hands-on approach in terms of constantly staying on top of their investments.

There are three multi-asset funds that have caught the eye over the past few months: Apollo Multi-Asset Balanced, IVEAGH Wealth and Frontier Multi-Asset Platform.

The Apollo Multi-Asset fund aims to achieve a positive return over the medium- to long-term that is in excess of normal cash deposit rates.

It invests in a range of assets including collective investment schemes, closed-ended funds, transferable securities, money market instruments and cash/deposits.

Apollo may also seek investment diversification by obtaining indirect exposure to alternative asset classes including hedge funds, private equity, commodities, and also indirectly in property. It may also utilise derivatives.

The fund takes on minimal volatility in the range of 7 to 10 per cent, and has a target return of cash plus 5 per cent. Although the fund faltered towards the end of 2011, it has already achieved growth of 3 per cent this year.

IVEAGH Wealth aims to generate attractive returns over the long-term with controlled risk. It takes on a low volatility risk of 6 to 8 per cent.

Although the fund finished 2011 with a loss, it outperformed the multi-asset sector. Early trends in 2012 suggest IVEAGH is moving in the right path to long-term sustainable growth through its approach of minimising risk.

Frontier Multi-Asset Platform takes a strategic, longer-term approach to asset allocation, combined with disciplined rebalancing techniques. Currency risk is minimised through hedging to ensure that investors receive the true returns of each asset class.

By minimising costs, the fund generates considerable compounded returns. It combines investments across a large range of asset classes, and is highly diversified with low volatility. The fund aims for a volatility ratio of 6 to 10 per cent annually – and over a three-year horizon has been one of the best performers in this space.

With market demand turning towards safe haven outlets and non-correlated investments, these multi-asset funds offer a stable and non-volatile investment.

By holding a large number of assets, investors can feel secure that they are spreading their money into a diversified fund that can generate long-term growth instead of risking their capital by putting it into one particular fund focusing on a specific asset class.

Abhishek Madarasmi is a portfolio analyst at Platinum Financial Service. The views expressed here are his own.