Multi-asset and liquid alternatives in great demand

Over the past few years, investors have been increasingly looking for high value-added solutions, such as multi-asset and liquid alternative approaches, in an attempt to meet their search for yield and mitigate risk. The trend was apparent in 2015, with Strategic Insight figures showing multi-asset funds – and fund of funds – gathering the highest inflows among active products. Strong flows were recorded in Europe and Asia, especially within flexible and conservative multi-asset solutions.
Pioneer’s 2015 Investors survey aimed at understanding the appetite for these products .

The rationale behind clients’ interest in multi asset solutions
Two thirds of professional investors acknowledged that end clients were willing to increase their exposure to multi-asset strategies.
Investors are likely buying multi-asset funds for diverse reasons, as they can fulfill a broad range of objectives. Pioneer focused on understanding what roles professional investors expected such products to play in client portfolios.

What are the objectives of multi asset strategies in your portfolio?
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Source: Pioneer Investments 2015 Professional Investors’ Survey

Portfolio diversification enhancement appeared as the main objective, cited by 55% of the respondents. Multi-asset strategies are also used to mitigate the overall volatility of a portfolio, according to 40% of those surveyed. Further, investors simply see multi-asset strategies as a way to enlarge the range of investment opportunities available thereby reducing risk exposure.

Breakdown by type of investor and region
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Source: Pioneer Investments 2015 Professional Investors’ Survey

Handing over not just security selection, but also asset allocation, is a potential reason to allocate to multi-asset products, according to a third of the professional investors interviewed.
Additional investment expertise, which comes with delegation in asset allocation, is particularly popular among licensed intermediaries in Asia. These investors are also interested in the possibility of reaching a specific outcome provided by multi-asset flexible solutions. Multi-asset funds are considered by Asian licensed intermediaries as a way to reduce the probability of portfolio drawdown. This mattered less in Europe, where the major reason for multi-asset investing within portfolios was simply diversification, especially in the wholesale distribution space.
Getting potential exposure to high quality asset managers was more of a focus amongst Italian IFAs (16%), compared to other professional investors who were less sensitive to this particular point, only flagged by 10% of the sample overall.

In a post-Brexit scenario, with autumn elections in Europe and in the US exacerbating market anxiety, we expect investors to accelerate the search for alternative sources of diversification in an attempt to build more resilient portfolios to navigate the potential volatility coming around the bend.

Gabe Altbach, head of Global Strategy and Marketing at Pioneer Investments

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