Even though some investors might consider some mainstream asset classes as alternative, true multi-asset funds can go even further afield.
Infrastructure, for instance, is an asset class that is gaining more and more attention, with the MSCI World Infrastructure index delivering a three-year return of 35.85 per cent to October 29, according to FE Analytics. But technically, it can still be considered an alternative asset class, certainly within the multi-asset structure.
Anthony Gillham, a portfolio manager on the multi-asset team at Old Mutual Global Investors, notes a true multi-asset fund may also access “real assets” such as infrastructure and property, which are “useful alternatives that get to the client goal”.
However, he also points to more niche options, such as hedge fund replication strategies and long-short equities. He notes: “Today, the best multi-asset funds tell you exactly what they’re going to do, what they’re going to achieve and how they’ll align with client goals. They also make a fuller and broader use of the investment universe and alternatives, such as real after-inflation return assets and other types of yield-management techniques.”
Interestingly, another asset class that could start attracting the attention of multi-asset investors, especially post the pension reforms scheduled for April 2015, is investment trusts.
These may be well-known investment vehicles, but James de Sausmarez, director and head of investment trusts at Henderson Global Investors, points out multi-asset managers generally tend towards open-ended vehicles because of the liquidity needed when making asset-allocation changes.
He says: “The time horizon is a key issue for multi-asset managers, but that said I think more multi-asset managers are looking very hard at investment trusts, particularly in the context of the changes to the pensions world.
“Those approaching retirement and those who have retired may well be advised to buy multi-asset products, and in that context they will buy a product they will hold for a long-time horizon,” he explains. “In that context, investment trusts fit very well and they generally provide a stable and growing dividend over time. That is the sort of thing you need in a retirement-type portfolio.”
Investment trusts are already widely used when accessing alternative asset classes, such as renewable energy, infrastructure and private equity, as the closed-ended structure is better suited to investments that need a stable asset base.
Mr de Sausmarez adds: “I think investment trusts have the potential to be more interesting to multi-asset managers in the future as they start to look for stable and growing income streams.”
Nyree Stewart is features editor at Investment Adviser
Alternative: index returns
35.85%: Three-year return from the MSCI World Infrastructure index
74.16%: Three-year return from the FTSE 350 Real Estate Investment Trusts index
31.18%: Three-year return from the IPD UK All Property index
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