The pros and cons of multi-asset strategies
Rob Balkema, Senior Director and Head of Multi-Asset North America, Russell Investments, explains how fund operators should look at multi-asset strategies.
Fund Operator Editor POSTED ON 5/3/2022 1:56:15 PM
Whether a fund operator should look for multi-asset strategies at a fund level or lower down at the individual fund stock exposures is a big decision to make. It is also one that can have major impacts on your business, says Rob Balkema, Senior Director and Head of Mult-Asset North America, at Russell Investments.
In Clear Path Analysis’s report Fund Technology, Data & Operations, North America, industry leaders from companies including Pzena Asset Management, Russell Investments, and S&P Down Jones look at the best ways fund operators can implement growth strategies that work best for them.
In the report, Balkema was asked whether fund selectors should look at one end or the other of the spectrum of multi-asset strategies. “Both,” he says. “In my role, I am a multi asset portfolio manager, and within that portfolio we have an income fund that we put out in the retail environment, one that we are dynamically managing. The other portion of my job is solutions focused, and I need to know how this multi asset aspect is going to fit into my total solution,” he explains.
"There are a lot of benefits with multi asset products; the ability to be nimble and to find unique asset classes"
He adds that if you are an asset owner, then you must look at how multi asset solutions work at not only the overall level of the fund, but also at the individual securities level. “Looking at how consistent your exposures are, and how they are going to impact the rest of your portfolio,” he explains, is imperative.
“This is a key challenge for asset owners, asset allocators and solutions providers to overcome with multi assets. There are a lot of benefits with multi asset products; the ability to be nimble and to find unique asset classes,” says Balkema.
"If there isn’t transparency, the total risks of the entire portfolio might be skewed"
A CFA Institute report from 2018 describes multi-asset strategies as the decathlons of the investment industry. “They require practically all the investment skills one can think of, from securities selection at the individual asset class level to the overall asset allocation,” it says and adds that “among all the multi-asset-strategy products on the market today, the vast majority are managed by multiple teams because one rarely finds all the required skills in one place—especially in today’s world, where investment talent has become highly specialised.”
Balkema agrees there are a lot of challenges with the strategy, especially in terms of transparency. “If there isn’t transparency, the total risks of the entire portfolio might be skewed,” he adds.
“We say, what is best for the piece might not necessarily be the best for the whole"
Transparency cannot be underestimated, say many in the industry; a Fidelity International report states that it is one of the most important facets of the industry now, after the Retail Distribution Review in 2013 and the Mifid rules, which came into effect at the start of 2018, it says. “[These] have increased the visibility and transparency of the products they buy from advisers, including investment products.” They have changed the regulatory landscape and the way advisers do business have driven demand for multi-asset funds in recent years, added the report.
Balkema says that strategies must be more personalised and monitored to assure good results. “We say, what is best for the piece might not necessarily be the best for the whole,” he adds. “If you have a multi asset fund that uses credit, whilst simultaneously your fixed income book is loving credit and your equity book is loving value, these become three correlated assets that, if you are not looking through at everything, might not be successful for the larger picture.”
To read the report in full, please click here.
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