Rather than having to build a portfolio of funds and shares, investors in multi-asset funds have access to a whole host of regions and asset classes in one easy-to-manage wrapper. These products are in high demand among people investing for their pension, or anyone looking for a long-term core holding in an ISA.
There are a handful of multi-billion multi-asset funds that take the bulk of investors’ money, but there are a number of lesser-known options out there that have been more than a match for the likes of Jupiter Merlin Income and Newton Real Return.
Moreover, while these funds are designed to give investors full diversification, for the sake of minimising manager and company risk it is well worth holding two or three multi-asset portfolios.
Here we highlight three lesser-known options that made it into the FE Select 100.
Standard Life Global Advantage
This £530m fund is managed by the same multi-asset team responsible for the £18bn Standard Life GARS portfolio.
Sitting in the IMA Mixed Investment 40%-85% Shares sector, it is much more equity-focused, and is therefore designed for investors with a higher risk-appetite than those focused on achieving an absolute return.
Guy Stern (pictured) and his team use the same three-process structure that has benefited the GARS fund in recent years. The strategic team is responsible for macro ideas, the multi-asset team implements these ideas across numerous asset classes such as equities and bonds, and finally the risk team ensures the portfolio is not overly skewed to a single area.
It is a far simpler portfolio than GARS, investing only in equities, bonds and cash. The team does not use short, market-neutral or directional strategies.
The fund currently has 78.5 per cent in equities, with the rest in bonds and cash. Top-10 positions include Vodafone, BP and a gilt coupon that expires in 2014.
Unusually, the fund aims to return the same as its benchmark – the IMA Mixed Investment 40%-85% Shares sector – but with a lower volatility.
Gleeson and his team point out the fund’s performance has radically improved since the multi-asset team took it over in early 2011, which they say bodes well for the future.
It has returned 22.25 per cent over the period, putting it well ahead of its sector average. The fund has been slightly more volatile, though.
Performance of fund vs sector since Jan 2011
Source: FE Analytics
This strong performance has ensured that the five-crown rated fund is also a top-quartile performer in its sector over three, five and 10 years.
The FE Research team says investors can be assured that they are in safe hands when holding Global Advantage.
"This fund benefits from the strength of the team, which is well resourced, highly structured and thoroughly experienced," the team said.
"This process involves 32 people and thus lacks some flexibility. They update their market views on a quarterly basis; although a lot can happen in financial markets between these reviews, this allows the team to focus on long-term performance only and prevents them from being distracted by market noise."
With ongoing charges of 1.36 per cent, Standard Life Global Advantage is one of the cheaper multi-asset funds out there. It requires a minimum investment of £500 and is available across most major platforms.
CIS Sustainable World
While ethical funds are not everyone’s cup of tea, many financial advisers report that they are receiving a growing number of enquiries about this sector from prospective clients.
They are treated with a great deal of scepticism as their ethical screening means they have a smaller universe of stocks and shares to choose from; however, many have delivered stellar performance in their own right, including FE Alpha Manager Mike Fox’s CIS Sustainable World fund, which made it into the FE Select 100 in the latest rebalancing.
The fund is one of the best performers in its sector since it was launched in September 2009, with returns in excess of 57 per cent. Fox does not have a recognised benchmark, but by means of comparison the IMA Mixed Investment 40%-85% Shares sector average has returned 33.72 per cent over the period.
Performance of fund and sector since launch
Source: FE Analytics
CIS Sustainable Growth has also been less volatile than its sector over the period and has done better in falling markets – something which Fox believes is a natural result of his ethical focus.
The manager currently has 83 per cent in equities, 15 per cent in bonds and the rest in cash. Lloyds, Walt Disney and ebay are among his biggest stock positions.
The FE Research team points out that Fox’s fund is less strict in its screening process than some of its rivals. While it excludes any business involved in armaments, nuclear power and tobacco, it tends to invest in a positive manner, targeting those that offer a product that will benefit society overall.
It said that the fund’s aversion to mining and commodities has helped it in recent months and warns that it may not be a suitable option for anyone wishing to retain a focus on bonds.
"The manager has a natural bias towards equities, which explains why the fixed interest portion of the portfolio is only used as a counterbalance," the team said.
"This could hinder performance if equity and bond markets move in opposite directions."
The £100m CIS Sustainable Growth fund requires a minimum investment of £1,000 and has ongoing charges of 1.54 per cent.
Cazenove Managed Portfolio
While not the highest profile of Marcus Brookes (pictured) and Robin McDonald’s offerings, the Cazenove Managed Portfolio has a strong record in recent years.
The fund is the only genuine multi-asset fund of those mentioned here, with its assets split between equities, bonds, property, infrastructure and other alternative investments.
Brooke and McDonald always have at least 50 per cent of their assets in the equity market and a maximum of 85 per cent. Worries about valuations have seen their cash weighting climb considerably of late, to 26 per cent at the time of writing.
It is a fund of funds, meaning that it invests in other collective portfolios to achieve its objective. Top-10 positions include Fidelity Special Situations, Majedie Tortoise and M&G Optimal Income.
According to FE data, the four crown-rated fund has returned 35.92 per cent over three years, putting it in the top-quartile of its Mixed Investment 40%-85% Shares sector. It has also been less volatile.
Performance of fund and sector over 3yrs
Source: FE Analytics
Gleeson and the FE Research team believe the managers work very well together, giving the fund enviable solid foundations. "The two co-managers have worked together for a long time going back to their previous roles before Cazenove," they said.
"This stability is undoubtedly a good thing."
The team adds that the managers' flexibility to hold funds not run by Cazenove should be looked upon favourably by investors. The fund of funds structure does mean that Cazenove Managed Portfolio is more expensive than the average multi-asset portfolio: our data shows it has an ongoing charges figure (OCF) of 2.21 per cent.