Multi-asset funds are a mug's game
That’s not just an opinion. We’ve done the research to back it up.
Betafolio’s Multi-Asset Fund Report 2021 looked at no less than 94 fund families, consisting of 420 multi-asset funds. Collectively, they hold almost £190bn of client money.
The heart-wrenching result of our study shows that, with very few exceptions, rather than adding value through their asset allocation and fund selection, most multi-asset fund managers detract value.
You can download the full report below, but to give you a taster, here’s a quick summary of our findings:
On a risk-adjusted basis, the vast majority of multi-asset funds continued to underperform the No-Brainer portfolios
The number of Fund families that delivered greater risk-adjusted returns than the average of our No-Brainer portfolio benchmarks was as follows: 22 over a three-year-observation period, 4 over a five-year period, 3 over a 7-year and 10-year period
The distribution of fund costs remained broadly the same as our previous last year. For OCF, the highest was 2.99%, the lowest 0.18%. For total cost, the highest was 3.9%, the lowest 0.24%
In our assessment of the potential of the multi-asset fund family to deliver value for clients in the long term, 19 achieved either an A- or A*-rating, 18 were awarded a B-rating, and the remaining 57 fund families had ratings of C or below
During the 2020 market downturn, there was no apparent relationship between actively manged multi-asset funds and capital protection
The clear takeaway from our latest report is that it’s time for advisers using multi-asset funds to reassess their proposition to ensure their recommendations are in the client’s best interest.
Another discussion to arise from our study is how advisers inadvertently undermine their own value. For example, the median cost of multi-asset funds (1.16%p.a.) is greater than what most advisers charge for their ongoing advice (1%p.a.).
Advisers might want to consider what message they’re sending to clients by recommending products that cost more than the advice itself.
To find out more about why multi-asset funds are still a mug’s game, download the Multi-Asset Fund Report 2021 here.