Multi-asset fund managers can invest your cash in stocks, bonds or alternatives anywhere in the world. It’s an incredibly broad sector with two funds looking completely different but both are grouped in the same sector. However, it’s a good indicator of where markets lie because these are professional investors that can choose between investing in bonds and equities, anywhere in the world, so they are quite a good indicator of where the best opportunities are.
The two biggest asset classes are bonds and equities. At the moment, multi-asset managers are more cautious of bonds than they are of equities. In particular, they are more cautious of government bonds than corporate bonds on the basis that they feel that the yields are so low at the moment that they don’t cover for the risk of inflation being higher in future.
We’ve been hearing about the bond bubble bursting for about three years now and it finally looks like yields are going to start to rise and prices are going to start to fall. While this is of concern to multi-asset managers, because they have got to hold some bonds in order to maintain diversification within their portfolios, not all are troubled greatly by it. Since the beginning of the year bonds have corrected a bit in the sense that the yields have moved up and the prices have moved down. Going forward at current prices it depends on whether managers expect growth to be strong in future or whether they expect growth to disappoint and inflation to be subdued. In the latter case, even at the level of bond yields currently multi-asset managers might be happy to invest.
Within the equities sector, multi-asset managers can invest anywhere in the world. Currently, they are more focused on developed markets such as the US and UK and within the past year or two they’ve become more willing to invest in Japan and Europe. Most managers are cautious about developing markets and in recent years even those who invested there have cut back their exposure.