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‘Multi-asset is the new diversifier’

Globalisation has accelerated market correlation but a multi-asset strategy can improve diversification and manage downside in a bear market, says Schroders head of IFA sales Steve Jackson.

According to Jackson, multi-asset investing and alternative asset classes enable investors to genuinely diversify in an increasingly synch- ronised global market.

Commenting on the solutions offered by multi-asset investing at Bankhall’s ann- ual conference, he told delegates: “Correlation between core markets has gone up 60 per cent over the last 30 years. When the markets go down, all the markets go down and as a consequence there is no differentiation.”

Jackson said multi-asset investing and alternative asset classes allow investors to counterbalance market correlation, smooth out volatility and provide equity-like returns with significan-tly reduced risk.

He said: “When markets are going up, we try and capture that upside. When markets are going down, we try to manage that downside.”

Schroders opened its diversified target return fund to retail investors in May, replicating the strategy of its institutional pension fund. The fund offers Libor plus 4 per cent gross of fees over a five-year cycle and generally uses collective investment sch- emes as well as transferable securities, investment trusts and derivatives.

IFA Smith and Pinching associate director Melvyn Pye said: “It is is amazing how many people are talking about target returns and multi-asset allocations bec- ause of the state of markets. It worries me that this is flavour of the month and people are jumping on the bandwagon and we should really be looking at this for the long term.”

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