The popularity of multi asset funds as a means of investment has grown in the past five years. The recent financial crisis has led to periodic crises and underperformance in a range of markets so funds that diversify have become more appealing.
The Investment Management Association classifies a multi asset fund as an investment product that diversifies, holding a minimum of 20 percent of its value in shares and a maximum of sixty percent in shares. It must have at least 30 percent invested in fixed income such as corporate and government bonds, with a minimum of 60% in established currencies, of which 30% must be in sterling
Previously, these funds existed as balanced funds, divided between shares and bonds. A multi asset fund offers more than simply a binary division between shares and bonds, and some investors believe this might be advantageous as the world economy is still highly volatile.
A very flexible fund in uncertain times appears to offer investors both rewards and security but it is important to examine the charges that apply to each fund and also the costs that the fund will incur switching from shares and bonds to other investments.
A fund manager will naturally be keen for you to take up the investment opportunity he is presenting you with, but no matter how attractive and versatile a multi asset fund sounds, you need to be able to question whether or not you or the fund manager gets more out of the deal.
The charging structure should show this. With a multi asset fund there may well be more to charge for, though you might also find that even with these increased costs the investment still makes sense.
As with all types of investment there are multi asset funds to suit different needs.
Some will spread risk more evenly and offer returns based on a lower level of potential volatility, others suit the more seasoned investor.
You will probably hear a lot more about multi asset funds in the coming months. The UK has become the fastest growing market for the funds in the last year after recent reforms to the investment landscape made other policies less lucrative to investment firms.
It is therefore a good idea to explore your own personal needs with a financial advisor before you make any major financial commitments to one fund or another.
THE VALUE OF INVESTMENTS AND ANY INCOME FROM THEM CAN FALL AS WELL AS RISE. YOU MAY NOT GET BACK THE AMOUNT ORIGINALLY INVESTED.