Know your stuff: Why success in multi-asset investing is more than potluck

by | Oct 24, 2022

Share this article

A successful multi-asset fund is not a random collection of different securities and asset classes; it encapsulates convictions and ideas about corporate, economic and environmental, social and governance trends. The art of building portfolios is to ensure these blend in a way that minimises risk and maximises opportunities.

That requires expertise, the first pillar of our approach in our MAF Core range. We’ve been managing multi-asset portfolios for over four decades, have a dedicated team of 45 professionals and draw on the insights of Aviva Investors’ capabilities across geographies and asset classes. Currently, we run around £98 billion in portfolios for Aviva and external clients.

We don’t follow the crowd by outsourcing our asset-allocation framework to a peer-group benchmark or third-party provider; instead, it is designed in-house by a dedicated global team with decades’ worth of experience in multi-asset investing. This frees us up to create an asset-allocation framework built on a more comprehensive set of methodologies than the average multi-asset solution.

Our asset allocation model is global. This enables us to create truly diversified portfolios free from a potentially unwarranted and unhealthy home bias.

Furthermore, traditional asset allocation models tend to split capital between equity and fixed income: simply put, to increase risk they allocate more to equity, and to reduce risk they allocate more to fixed income. But a strategy that treats all fixed income as low risk and all equities as high risk is outdated.

To create effective diversification and enhance risk-adjusted returns, we divide assets among two categories: Growth and Defensive. Growth assets have the potential to drive the portfolio’s growth – they include equities and riskier forms of fixed income. Defensive assets are held to protect the value of investments and manage risks: these include cash, government bonds and lower-risk corporate bonds.

As you move from MAF Core I (the lowest-risk fund in our offering) to MAF Core V (the highest-risk fund), the allocation to growth assets goes up and the allocation to defensive assets goes down.

Many traditional asset allocation models rely heavily on historical data to build and manage funds –we combine historical data with proprietary expected-return projections to guide our decisions. This means we can incorporate recent market trends and forecasts and develop a framework relevant to current conditions.

Similarly, where many other funds use volatility as the primary measure of risk, we seek a more holistic view. By incorporating tail risk into our analysis, we can gain a better understanding of what drives risk and return. We also look at the funds’ exposure to various factors to understand if we hold any unintended biases. We use stress testing and scenario analysis to understand how susceptible our funds are to interest rate changes, inflation shocks and market sell-offs.

Success in multi-asset portfolios is not down to chance. It requires resources, experience and robust processes – some of the qualities we believe help our MAF Core range stand out from the crowd.

To find out more about the MAF Core range, click here


This is a marketing communication

Important information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”). Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.

The Aviva Investors Multi‐asset Funds comprise two ranges, each with five funds (together the “Funds”):Aviva Investors Multi-asset Plus Fund range comprises the Aviva Investors Multi‐asset Plus Fund I (“MAF Plus I”), the Aviva Investors Multi‐asset Fund Plus II (“MAF Plus II”), the Aviva Investors Multi‐asset Plus Fund III (“MAF Plus III”), the Aviva Investors Multi‐asset Plus Fund IV (“MAF Plus IV”) and the Aviva Investors Multi‐asset Plus Fund V (“MAF Plus V”) Aviva Investors Multi-asset Core Fund range comprises the Aviva Investors Multi‐asset Core Fund I (“MAF Core I”), the Aviva Investors Multi‐asset Fund Core II (“MAF Core II”), the Aviva Investors Multi‐asset Core Fund III (“MAF Core III”), the Aviva Investors Multi‐asset Core Fund IV (“MAF Core IV”) and the Aviva Investors Multi‐asset Core Fund V (“MAF Core V”).

The Funds are sub-funds of the Aviva Investors Portfolio Funds ICVC. For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies in English can be obtained free of charge from Aviva Investors UK Fund Services Limited, St Helen’s, 1 Undershaft, London EC3P 3DQ. You can also download copies from our website. Issued by Aviva Investors UK Fund Services Limited. Registered in England No 1973412. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119310. Registered address: St.Helen’s, 1 Undershaft, London, EC3P 3DQ. An Aviva company.

Advertisement

Share this article

Related articles

Most Popular this week