PA ANALYSIS: Why professional investors buy multi-asset funds

Added 7th August 2017

Multi-asset funds have been an investor favourite for years, but why would a professional investor invest in these one-stop shop funds?

PA ANALYSIS: Why professional investors buy multi-asset funds

It’s probably a fair assessment that nearly all of the more than €300bn (£271bn) of net investment in multi-asset funds over the past three years across Europe stem from the retail sector.

Multi-asset funds (or funds-of-funds) are an ideal vehicle for do-it-yourself investors looking for a simple, risk-managed investment solution that delivers a steady return.

“Five of the 10 most popular products on our execution-only platform are multi-asset funds," says David Karni, head of portfolio management at BCC Risparmio & Previdenza, a collective of regional banks in Italy. "If you have ‘income’ in your name as a fund, you’ll get inflows.” 

But does investing in multi-asset funds make sense for professional investors too? After all, professional wealth managers are paid to manage their clients’ risk exposure and asset allocation. By allocating money to multi-asset funds, they would at least partly cede control to external managers.

This dilemma probably explains why roughly half of Europe’s professional investors, polled at an event run by PA's sister title Expert Investor in March, prefer to stay away from investing in multi-asset funds altogether (see chart).

“We invest in multi-asset funds for diversification purposes” - Grigorios Aggelidis

Frank Reisbol, director of Carnegie Luxembourg, a private bank catering for wealthy Nordic investors, belongs to this category.

“Multi-asset funds have embedded asset allocation, making it difficult for us to control portfolio risk,” he says.

Multi-asset funds also do not fit in the philosophy of Rabobank in the Netherlands.

“We want to be in control of asset allocation ourselves,” explains Rishma Moennasing, a fund analyst at the bank. “And we want to fit in certain themes [such as robotics] into our asset allocation as well. Investing in multi-asset funds doesn’t help such an approach,” she adds.  

Diversification benefits

But other investors do allocate large chunks of money to multi-asset funds, precisely because of their asset allocation benefits.

“We invest in multi-asset funds for diversification purposes,” says Grigorios Aggelidis, director at the German wealth manager Geneon Vermögensmanagement.

Alongside the actively managed funds that reflect Geneon’s own asset allocation, the company allocates 15-30% of client assets to multi-asset funds. What Aggelidis seeks to achieve with this approach, is to generate smoother returns in the long run by having his eggs in different baskets.   

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About Author

Tjibbe Hoekstra

Senior Reporter

Tjibbe joined Expert Investor as a senior reporter in March 2014. Before moving to London he worked as a financial news reporter for various news outlets in Amsterdam, including Reuters and ANP, the main news agency in the Netherlands. He also worked for Fondsnieuws, a website and magazine for finance professionals in the Netherlands. Tjibbe holds a MSc in Public Administration and a post-graduate diploma in Journalism.

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