Multi-asset funds tipped for 2010

Multi-asset funds are set to soar in popularity in the year ahead, as investors seek to spread risk, according to research carried out among independent financial advisers (IFAs).

More than one third of the 175 IFAs polled by the financial technology firm 1st-The Exchange forecast that multi-asset funds will be the most popular investment choice in 2010, with 29 per cent picking absolute return funds, and 18 per cent backing passive investment strategies.

The survey suggests that investors will seek greater diversification of their portfolios in the coming months, and reduce exposure to risky assets. “I think you’ll see a back-to-basics approach,” said Paul Yates, a business development director with 1st-The Exchange.

These findings coincide with the launch of a new multi-asset fund that will gain exposure to equities, bonds and commodities solely via a portfolio of low-cost exchange-traded funds (ETFs) and index trackers.

Fund manager T Bailey is making the fund available from this month with a total expense ratio of 0.99 per cent – one of the lowest charges for funds of this type. Multi-asset funds that hold portfolios of actively-managed underlying funds generally charge between 2 and 2.5 per cent a year.

IFAs’ interest in multi-asset ETF portfolios suggests that private investors are realising the cost benefits of index trackers, but still want a manager to make the asset allocation decisions. “The audience for passive funds is growing yet, worryingly, many people end up with a holding tracking the FTSE All-Share, with no view on global regions,” argued Philippa Gee of T Bailey.

Listed ETFs can give wider exposure while keeping the costs down to 0.2-0.6 per cent a year. Fund managers using passive trackers within multi-asset portfolios include Seven Investment Management, Evercore Pan-Asset Management and Frontier.