According to FundsNetwork, the Mixed Investment 20-60 Shares sector topped the group’s bestsellers table in July, continuing its momentum from previous months, while equity funds continued to outperform on the sales charts.
The IMA, on the other hand said that mixed assets were the second best-selling asset class, with net retail sales of £390m, behind equity, which was saw net retail sales just over the £1bn mark, boosted by the UK Equity Income sector.
The reasons behind this increase in the demand for these two product categories are manifold, but two stand out: demographics and regulation.
According to Jasper Berens, head of UK retail at JP Morgan Asset Management, the needs of clients are changing and, as a result, the products being demanded by advisers are changing as well.
The UK is getting older and living longer and as Berens points out, there are a lot of market cycles in the 20 years between 65 and 85, which makes it hard to justify putting all one’s assets into low risk asset classes. And, the gap between retirement and death is only likely to increase over time, even if retirement ages do go up.
While acknowledging that once they retire people stop working or change significantly the manner in which they work, and thus that income and capital preservation are ever more important, Berens explains that people also need to grow their assets.
“I think impact of this ageing demographic is going to be the next great stage in asset allocation consideration,” he says, adding, "People are not just thinking about income in the drawdown phase, they are thinking about how to pay off a mortgage, or how to build up a legacy.”
For Berens, a product like a multi-asset income fund, ticks all the boxes for such a requirement, because it not only gives one an income in retirement, but it also helps grow one’s capital.”
This need for a specific outcome, be it income in retirement or a child's eductaion needs, is another reason why multi-asset products continue to grow in stature. Driven somewhat by the changes enforced by the Retail Distribution Review, which has seen a greater profesionalisation of the advisory community and a concurrent increase in the level of client education, many investors are becoming better aware of exactly what their needs will be in retirement.
“It feels to me that most advisers are now packaging some kind of outcome for their clients,” Berens says.
This can take the form of multi-asset, multi-manager or discretionary portfolios making use of the ‘building block’ type products, on offer by JP Morgan, he says, or a ‘one stop shop’ provision of service, that is favoured by a number of IFAs, Berens says, and adds: “The concept of us selling individual funds to the broader IFA market, while still there, will change over time.”
“The top end of the IFA market is still very much buying individual building products and advising their clients on individual building block products mainly because they are now building portfolios. But the broader IFA market that doesn’t always have the scale at the company level to research individual funds is looking for solutions, because the consumer themselves are saying to their IFA I want something to help with retirement, or with my kids education to help them manage their personal affairs.” Berens says.
As people continue to get older, and the regulatory burden continues to mount, so investors will need increasing amounts of income, but more importantly, a static pot from which to draw down is no longer enough, and in a bid to both grow and protect income, multi-asset’s role is likely only to increase.
As Berens says: “In 10 years time, we will probably have more assets globally in our multi asset solutions and in our solutions business generally, than we have in individual funds, because the change we are seeing now is so significant. But it will be a tight run thing, because we also sell into those people that are building their own solutions."
