Multi Asset Funds
Multi-asset fund belongs to a wide group of collective investment schemes. Depending on the legal jurisdiction, it might be a legal entity (such as corporation, business trust, partnership, or limited liability company) or a collective investment vehicle without legal personality.
There are several elements that create a multi-asset fund. Those compose of investors, which contribute their capital to the fund in order to generate profit, investment, which is the main source of profits, asset management activities and the person which implements them and on which investment skills the success of the multi-asset fund is dependent, such as fund manager.
Conditional on the jurisdiction and some specific requirements imposed on each of these elements, different types of multi-asset funds can be distinguished, such as, for example, mutual fund, hedge fund, trust fund or income fund.
In order to fully understand what a multi asset fund is, each of these elements needs to be explained. Consequently, with the intention of creating even more comprehensive picture on multi asset fund, some examples of funds belonging to this category are given.
In this web-site you are going to find information on basics of multi asset fund as well as some concrete examples.
Definition of a multi asset fund
The multi asset fund is a type of investment fund that is highly diversified among different asset classes. The portfolio of such a fund constitutes a very good natural hedge against evolvements in macro-environment.
Investment into a multi asset fund is the best choice for individuals afraid of investing their assets into one specific sector and for individuals who have medium risk-tolerance. Multi asset funds often have innovative global multi-asset, multi-strategy portfolios. A manager of multi asset fund tends to have an aim of achieving long-term capital growth through investing into balanced portfolio of assets, composed of equities, fixed interest securities, warrants and derivatives, etc.
Multi asset funds tend to have a highly diversified team of investment specialists, whose members greatly differ in skills and capabilities in order for the multi asset fund to be able to successfully invest in diverse asset classes.
multi asset fund structure
Diversification factor in Multi asset Fund
The portfolio of multi asset fund consists of variety of investments. The multi asset fund seems to be an extension of a traditional balanced fund, which mainly invests in two asset classes, namely equities and bonds. In its more basic form, multi asset fund portfolio invests in mix of equities, bonds and property. In its more complex form, it has an exposure to a broader range of asset classes, including private equity, commodities, hedge funds, etc.
The portfolio of multi asset fund seems to be constructed according to the Markowitz portfolio theory, which is one of the most frequently quoted and followed investment theories in the world of finance. According to this theory, a well-diversified portfolio constitutes a good hedge against loss of value while, at the same time, increases the chances of making good returns. This happens due to the fact that diverse assets are affected by different macroeconomic factors. Therefore, it is highly unlikely that all of these investments will decline in value in the same time.
It needs to be understood that not always the more diversified the portfolio the better. A key to successful diversification is to keep balance and to choose the right range and scope of investments. If a fund manager does not perform his duty promptly and allows for the portfolio to be overly diversified, he risks that the strategy will bring really poor returns or losses.
Nevertheless, such theories do not hold true during economic crises such as the recent, which has proven that even an extremely well diversified portfolio is not totally hedged against the drop in its value. Therefore, the principle of diversification does not always guarantee positive return or lack of losses. However, at the same time, it is one of the most effective ways to protect one's portfolio.
Who are Multi Asset Funds aimed at?
Multi asset funds provide diversification by offering access to a broad range of asset classes. Investor in multi asset fund aims to spread risk across different asset classes and to benefit from decent positive returns that are above money market return.
Multi asset funds are unlikely to be suitable for either very low or very high-risk investors. If an investor is risk tolerant he might decide to invest just a small portion of his assets in multi asset fund as a way to hedge. If an investor has a long-term strategy and therefore would prefer not to risk losing his investment, he is likely to invest a significant portion of his portfolio into multi asset fund.