Multi asset funds

Are multi asset funds the perfect one-stop shop for your investing needs? Or is entrusting all your eggs to one fund manager a bad idea?.

I’ve never been a fan of multi asset funds. If an investor has £100,000 of free capital he or she can, in theory, put it into a multi asset fund that matches his or her risk profile. Classically, the aggressive funds have more equities than the defensive funds. In the bad old days the cash might have found its way into With Profits, just another multi asset proposition, but this time wrapped in knitted smoke. Either way, putting it all with one house is a dumb idea.

I think it helps for people to know what asset classes they are in, why, and when it might be appropriate to change the mix. If the £100,000 was split between four or five multi asset funds, the investor would have some difficulty tracking the aggregate asset allocation, let alone adjusting it.

For many investors, the picture is also complicated by their ISA portfolios. For higher rate taxpayers especially, using the annual ISA allowance is a must. If the investor is holding a mix of bonds and equities, it makes most sense to hold the bonds in the ISA and the equities outside, so a multi asset fund doesn’t ring the right tax bells either.

I can see why the providers like them: they are a way to compete for a bigger share of the individual investor’s pot. But they can make life even more complicated, which is the last thing that most investors need or want.

Read this article at http://www.candidmoney.com/articles/article149.aspx