According to Justin Onuekwusi, CFA Fund manager on the multi-asset funds at Aviva Investors the new Mixed Investment labels for what used to be the Cautious, Balanced and Active Managed Sectors have not served to clarify risk levels to investors because risk is measured only through the exposure to equities.
The three UK funds Onuekwusi runs with the multi-asset team at Aviva are split across the risk spectrum and defined as cautious, balanced and adventurous. But since their launch in November 2010, the funds have been listed in the IMA Specialist Sector.
He said the team did not want to be compared to funds in the IMA Managed Sectors because this would lead to risk levels dictated by the peer group in an attempt to remain top quartile.
"If the peer group decides to increase risk, it means you have to increase it too and this means the funds are relative rather than absolute risk funds," he explained.
On this vein Onuekwusi said the team wanted to be unconstrained in terms of asset allocation too, as this gives "more flexibility and more degrees of freedom to invest in asset classes such as direct property, emerging market linked bonds and absolute return bonds”.
He said they are finding more and more multi-asset funds were looking not to be in the [managed] sectors, for these same reasons.
"What if all of a sudden equities become more risky due to deleveraging, we want to have the discretion and flexibility to take the asset class up or down to whatever we want.
"The focus on the risk of total portfolio makes more sense than the risk you have in particular asset classes," he added.
The beauty of multi-asset funds should mean they offer diversification over a number of different asset classes and in volatile markets true multi-asset funds should hold their own, which is why Onuekwusi thinks it is vital to be unconstrained.
Earlier in the month the £1.6bn M&G Global Dividend Fund surprised some commentators by choosing not to list in the IMA’s new Global Equity Income Sector and remaining in the Global Sector instead.
Its reasons for doing so were because it did not want to be forced to run the portfolio with a prescribed yield target and did not think the comparison of the fund’s total return approach with high yield strategies seemed appropriate.
Do you think some managers are right to choose not to list in the sector most expect them to? Does this make it harder for you to compare their fund like-for-like with its peers? Let us know below.
