While September will inevitably herald in a number of new fund launches, it is arguably proving harder than ever to excite the investment community struggling to find justifiable reasons to move assets.
Invest in equities? Where’s the value? Bonds? Where’s the yield? Absolute return? Where’s the performance? Property? Er, perhaps not a great idea right now…
Instead, asset managers are looking to ‘multi-asset’ for new ideas, an increasingly vague term which captures funds in the IA’s Mixed Investment categories as well as within absolute return.
According to Baring Asset Management – which itself has invested heavily in the space – over a quarter of IFAs are encouraging investment in multi-asset funds to combat current market volatility, with a fair portion expecting to increase their exposure to such strategies.
That’s fair analysis, though it perhaps neglects the bulk of the wealth management community whose job it is to make their own asset allocation decisions.
The greatest level of innovation in recent years has come in the aforementioned absolute return space though – as the recent poor performance and outflows from Standard Life GARS suggests – the larger, multi-faceted strategies have lost some of their sheen and future success is not guaranteed.
Indeed, with the FCA about to undertake a review of absolute return – and two-thirds of such funds having posted negative returns this year – perhaps there’s innovation in simplification, while also maybe relabelling the sector to remove any promises of ‘absolutes’!
Back to the issue of cost, and with commentators (though crucially not providers) talking up the prospect of zero-fee funds, there’s an argument to suggest that it is the world of passive funds where the next great invention can breed real success.
Interestingly, Morningstar data analysed by WisdomTree found ETFs suffered net outflows of $9.1bn in the first half of this year across Europe, while smart beta and alternatively weighted strategies achieved inflows of $5.7bn.
Still largely the domain of institutional investors, smart beta offers a different route to achieving diversification.
However, as we have seen with absolute return, only time will tell if these sometimes opaque strategies can deliver on their promises and capture the imagination of a largely sceptical UK retail investor market.
