The popularity of multi-asset products has soared over the past year with research from Aegon revealing 36% of advisers said multi-asset funds were their primary choice for clients in 2017 compared to just 18% who said the same in 2016.
However, Potter, co-head of BMO’s F&C multi-manager fund range, said there was a danger in people being over reliant on the vehicles.
“Many of these multi-asset solutions haven’t covered themselves in any glory and the amount of money going into them is absolutely staggering,” he said.
“I’m not particularly having a go at the product, because they are doing something that people want, but my observation is that many, many people are buying these products almost like they are the complete one-stop solution.”
A report from the portfolio research team at Natixis Global Asset Management also found multi-asset use was on the rise.
“The shift into multi-asset, absolute return strategies appears to be recognition by advisers that fixed income, especially with a domestic bias, is likely to be lower yielding and higher risk when compared to previous years,” it said.
But Potter likened many of the strategies employing ‘top down’ allocation tactics to an attempt to solve a Rubik’s Cube, namely that they are “a puzzle that people cannot solve” where one side is working while the other falls apart.
“You could sit there for five hours and nearly get all the blue side right, then you turn it over and the other side is a complete mess and when you move to sort that out you cause confusion on the other side,” he said.
This means they do not offer the benefits many investors believe they will.
In defence of his own multi-asset funds, Potter said: “There is one key difference in what we do versus what the other lot do and that is we build our portfolios from the bottom up. It’s a critical point.”
The F&C team’s range of fund of funds now has £3.1bn assets under management.
Potter added: “I’m not overtly criticising individual decisions in [multi-asset] funds, I’m just saying I think yet again the industry is making itself far too complicated.”
