[Investing] Maximize your investment potential through multi-asset funds

Main points

• Multi-asset funds allow investors to invest in multiple asset classes through a single fund, leveraging the potential of stocks, bonds, cash and even non-traditional assets such as infrastructure, convertible bonds and commodities.
• Various asset classes perform differently throughout market cycles. Multi-asset funds diversify investments into multiple asset classes to achieve diversification and help investors reduce risks and increase long-term returns.
• Historical data shows that stocks and bonds generally rebound before the first interest rate cut, making multi-asset funds an attractive option.

Multi-asset funds are an effective tool that help investors invest in multiple asset classes through a single fund. This kind of fund breaks through the limitations of a single investment asset class, industry or region, allowing investors to flexibly capture the potential of stocks, bonds, cash, and even non-traditional assets (including infrastructure, convertible bonds and commodities).

Multi-asset funds carry varying degrees of risk. Low-risk funds tend to have higher allocations to fixed income, while higher-risk funds generally have a higher proportion of equities. While low-risk funds have lower volatility and drawdowns than higher-risk strategies, the upside potential is also relatively smaller.

The power of asset class diversification

A key advantage of multi-asset funds is their ability to provide diversification. The basic principle behind multi-asset investing is that various asset classes perform differently throughout market cycles. By diversifying across multiple asset classes, investors can reduce risk and increase returns, thereby enhancing long-term investment potential.

Managing volatility and drawdowns

Multi-asset funds are particularly useful for managing volatility and drawdowns, diversifying risks by investing in different markets, and leveraging the superior performance of individual asset classes to offset losses in other asset classes, thereby protecting the investment portfolio from significant losses. Overall investment performance is more stable. In an ever-changing market environment, the ability to effectively manage risks is very important for investors seeking stability and long-term growth.

Flexible to adapt to market conditions

Actively managed multi-asset funds have the advantage of being flexible and adaptable. Professional fund managers have the flexibility to adjust asset class allocations to capture short-term opportunities and manage downside risks. For example, when fund managers believe stocks are performing more attractively, they may increase their allocation to stocks while reducing their holdings in bonds.

Why invest in multi-asset funds now ?

Rising interest rates around the world have made bonds and stocks cheaper. As central banks begin to ease monetary policy as inflation slows, stocks could benefit from improving sentiment and profits, while bond prices are supported by falling yields. Past data also shows that bond and stock markets generally rebound before the first interest rate cut. In this environment, highly diversified portfolios are likely to outperform cash over the next six to 12 months, making multi-asset funds a good choice for some investors.

How should investors use multi-asset funds?

By leaving asset allocation to professional fund managers, investors can benefit from their expertise. Multi-asset funds are a cost-effective way to invest broadly in different asset classes compared to buying a single stock, specific asset class or industry. Such funds can serve as the core allocation of an investment portfolio, along with satellite allocations tailored to the investor’s preferences and objectives.