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Advisers turn to multi-asset as managers watch for disruption

New Model Adviser caught up with a bevy of fund managers at this year's conference and awards.

Advisers turn to multi-asset as managers watch for disruption

Multi-asset was a popular choice for advisers moving their asset allocations.

According to a poll at the conference, 32% of advisers planned to increase multi-asset allocations in the next six months (see chart).

Citywire AA-rated Iain McCombie, co-lead manager of the Baillie Gifford Managed fund said a key focus is technological change. ‘Disruption happens all the time,’ he said. ‘We want to be on the right side of history.’

Keith Balmer, product specialist in the multi-strategy team at BMO Global Asset Management highlighted how changes to the asset management market since 2012 have led to a big focus on fund charges. ‘Fund prices are now out in the open,’ he said. ‘You need to show you’re offering value.’

Against this backdrop, low-cost passive funds have proved popular. ‘There is a need for active managers to get in at the low price points of passive management,’ Balmer said. ‘But this requires scale.’

The recently launched BMO Universal MAP fund range of multi-asset investments has an OCF capped fee of 0.29%.

Meanwhile, Citywire A-rated Paul Flood, portfolio manager in the Newton multi-asset income funds, said he likes to allocate to investments with limited exposure to the economic cycle.

He highlighted how quantitative easing has led to high fixed income prices, with investment grade corporate bonds in Europe yielding just 0.6%. In this environment, Flood thinks alternatives (such as renewables, aviation, property and infrastructure) are attractive relative to both bonds and equities. Many of these are government-backed, yet they can yield around 7% a year. Flood points out this is around six or seven times more than government bonds.

[The highest allocation in this poll was ethical investments, chosen by 34% of advisers. This was in fact a swing from a previous poll taken earlier in the conference. The first poll, taken on the first day of the conference, put mixed-assets at 32% and ethical investments at 23%. In the second poll ethical investments increased to 34%. Infrastructure dropped from 30% of the votes to 23%; property from 9% to 2% while alternative UCITS increased from 6% to 9%. Read our story on the ethical swing here.]

Pension problems

Trevor Greetham, head of multi-asset at Royal London, said there is a language problem with the word ‘income’ that means clients are not necessarily getting the right products for their pension drawdown, writes Jack Gilbert.

‘There is a big problem where the word “income” is used in two different contexts and the two get conflated by customers,’ he said. ‘People say they want income in retirement, when they actually mean they want to spend money in their pension.’ 

Greetham went on to warn income funds often come with a ‘false sense of security’. Even if an income fund or a bond is yielding 7% there is a risk of the underlying capital. In particular, Greetham warned of credit risk for investors seeking income.

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5/55 in Mixed Assets - Absolute Return GBP (Performance over 3 years) Average Total Return: 22.75%
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