Need for one-stop solution means multi-asset funds far from a fad
Peter Branner, SEB
Both retail and high net worth investors are showing more interest in multi-asset products, proving a major draw due to range and flexibility
The need for advice is increasingly driving private investors towards solutions that allocate dynamically across a wide range of asset classes. This trend has a deep impact on fund selection and asset allocation processes.
“Multi-asset funds are more or less the only product where we see inflow from retail clients, in a number of different risk categories,” says Peter Branner, CEO at SEB Investment Management, which manages €95bn ($108bn) in total assets, and is one of the largest asset management firms and distributors in Scandinavia.
The same trend is seen in the private banking and family office segment but here asset allocation and manager selection is much more individual and profound for larger clients.
Especially after the financial crisis, clients realise that they need help to diversify and allocate across a broad range of assets, says Mr Branner. “Furthermore, low interest rate levels are driving clients to take more risk, if they are to get any return, and they want advice for doing that.”
Increased interest in multi-asset solutions means the gatekeeping role is played more and more by portfolio managers, who select in-house as well as third-party funds, explains Mr Branner.
Multi-asset funds are more or less the only product where we see inflow from retail clients
Assets tend to flow into in-house funds within the multi-asset solution range, as opposed to individual third-party funds, and flows are concentrated as the number of third-party funds selected by portfolio managers/gatekeepers is more limited, for practical reasons.
As a consequence, asset allocation has evolved. “The asset allocation process can no longer be anecdotal, it has become much more professional and institutional, and it is about building a logical macro-story that clients can buy into. When it comes to the actual investments, our focus is now more about risk allocation, rather than traditional asset allocation,” says Mr Branner.
“Today, the big challenge for clients is uncertainty,” says Jörg Grossmann, global head of fund selection and product strategy at Credit Suisse.
Investors worry they have missed the strong stockmarket rally of the past few years and that equities have now become expensive, although their focus remains on US and European stocks, as well as global equities. In fixed income, non-core markets producing interesting yield are much sought-after, with good inflows seen in Asian corporate bonds, explains Mr Grossmann.
But clients’ interest today is in multi-asset funds too, “as investors are attracted by a solution that takes care of everything”.
Asset management firms confirm the multi-asset trend is here to stay.
“Given market volatility, financial markets on the expensive side, and fairly low expectations for nominal returns in the medium to long-term, there is increased interest for alternative type, flexible strategies,” says Massimo Greco, head of European Funds at JP Morgan Asset Management.
These strategies include more outcome-oriented products, such as asset allocation funds, or products that provide less correlated sources of returns, such as liquid alternatives, as opposed to products with traditional market beta exposure. “This is definitely a trend, as opposed to a fad.”
