Whenever Wall Street comes up with a new product it behooves Main Street to be skeptical about the hype. In this article we are going to look under the hood of the latest product to get the UK financial services market in a tizz: the multi-asset fund. Whilst there is nothing new in having a balanced fund of bonds and equities, there are more and more funds being launched that offer access to a broader range of asset classes, including: private equity, commodities, bonds, equities property, and hedge funds. What is also new about these products is the low cost structures that they are being offered in.
Low cost structures have become a reality as the result of consumer demand. After years of being hammered by large fees these have finally come under the microscope as fund values have plummeted. It seems a bit rich to pay someone 3% per annum to manage the dramatic decline of your assets. The advent of Exchange Traded Funds and Exchange Traded Notes are the other driver behind multi-asset funds. Now fund managers can use these listed tools to access a broad range of asset classes. Indeed the Gold ETF is though to have boosted the price in gold as it was formerly quite tricky to invest in without purchasing the physical product.
The funds are good for long term investors, but they wouldn’t be a good holding for anyone with a very high or very low risk profile. A further concern is that since they are relatively new products we can’t be sure if they will perform as intended over time. So in summary they look like a product with promise for certain types of investor.
For more information on multi asset funds take a look at: http://multiassetfunds.co.uk/.
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