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Diverse perspectives

With markets experiencing another frantic week, it seems that investors are being drawn increasingly to investment vehicles which offer small but steady returns.

The Investment Management Association says the cautious managed sector saw inflows of £465.7m in the fourth quarter of 2007 and was the most popular sector for the year overall with £1.6bn net sales.

AFI panellist and Barclays Wealth associate director Kypros Charalambous believes this cautious sentiment could bring multi-asset funds to the fore in 2008.

He says: “Within my AFI selection, I hold the SVM global fund, which uses a multi-asset approach.

“Barclays Wealth is are already some way down the line of utilising the benefits of multi-asset portfolios, increasing our weightings in assets such as hedge funds and property.”

Charalambous says continuing volatility in global markets has lessened the attractiveness of equities in the short term and increased the need for diversification.

“As a house, we have gone neutral on equities. We are waiting to raise cash and increasing our alternative weightings – really just see-ing how things happen over the next few weeks before we start buying again,” says Charalambous.

Chelsea Financial Services managing director Darius McDermott says strong results from multi-asset funds amid the recent market turmoil means that the funds are becoming more attractive across the sectors.

McDermott says: “We put the HSBC multi-asset open global return fund into our AFI portfolio in the November rebalancing.

“We predicted that there would be greater volatility in the markets and the fund fitted with our intention of taking risk off the table.”

Patrick Armstrong, who co-manages Insight Investment’s multi-asset UK diversified target return fund, says there is no guarantee that multi-assets funds will be completely unaffected by a period of high volatility.

“In the short term, if everything falls off a cliff together, it can have an effect on multi-asset portfolios,” he says.

Despite this, Armstrong says the appeal of the funds for risk-averse investors is that risk management lies at the very core of a multi-asset portfolio.

He says: “The advantage of multi-asset is that it is not reliant on skill but on a combination of risk premia. Skill, when it works, will give you steady returns. However, when multi-asset hits problems, it can fall rapidly.”

Over the last year the SVM global and HSBC open global return funds have posted returns of -0.2 per cent and 4 per cent respectively.

Armstrong’s portfolio had returns of 4.9 per cent over the same period.

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