Focus on multi-asset – Swiss investors lukewarm on multi-asset funds

Allocators in Switzerland have been selling off holdings in multi-asset funds with rigid equity allocations this summer, despite the popularity of the asset class elsewhere in Europe.

Data from Lipper shows allocators put €7.3bn worth of new business into European multi-asset mandates last year, when the industry overall suffered €70.5bn net redemptions. This made multi-asset the only one of six individual fund strategies tracked by Lipper to win more new business than it lost.

Yet the attitude of Swiss allocators to the asset category this summer has been lukewarm at best. From June to July, Swiss asset allocation funds lost nearly CHF370m in net flows, while most other asset classes experienced inflows, according to the Swiss Fund Association.

The trade body notes that volumes in this asset category have fallen steadily over the past three to five years due to disappointing returns from funds that have high allocations to equity.

Matthäus Den Otter, CEO of the SFA, explained that Swiss investors this year continue to be weary of returning to the equity market. Yet many multi-asset funds have a set allocation to equity of 40% or more. Swiss investors consider this to be too high.

Den Otter says they are “increasingly taking the initiative themselves when it comes to asset allocation and are less keen to operate within the risk models set by banks.” Funds with more flexible allocation models do remain interesting, he notes.

At the same time, flows into pure equity funds have increased moderately and inflows into pure bond funds have stayed high. This may suggest that the Swiss are taking asset allocation into their own hands.

The trend in Switzerland, however, seems to go against the more general European trend. European asset managers continue to see demand for multi-asset solutions and have been strengthening their teams this summer in response.

Baring Asset Management, for example, recently announced its multi-asset Baring dynamic asset allocation (DAA) fund has reached over £5bn in assets under management since its launch in January 2007.

Last month, the firm hired Christopher Mahon as director of asset allocation research in its multi-asset team, replacing Toby Nangle, who moved to Threadneedle to head up their multi-asset division in January.

Andrew Benton, head of UK and international institutional sales at Barings, said: “We have long made the case for dynamic multi-asset investing and the benefits this can bring to long term returns, particularly in volatile conditions.”

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