Potter doubts value of multi-asset funds

Credit Suisse Asset Management joint head of multi-manager Gary Potter has questioned the value of holding single-manager multi-asset portfolios within a fund of funds.

One of the target markets for the recently launched King & Shaxson ethical balanced income fund, which applies a multi-asset approach to ethical investment, is multi-managers. But Potter, who runs a multi-manager ethical fund for Credit Suisse, believes multi-managers will prefer to make their own asset allocation calls.

Potter says he is not against multi-asset portfolios but he thinks the problem is that they are difficult to put into practice because success depends on the quality of asset allocation and market views.

Potter believes few managers are able to consistently make the right decision on when to move between asset classes. He says a manager may get two out of three decisions right but one wrong decision may wipe out their previous good work. In his view, trying to get ahead by switching asset classes too early could mean multi-asset funds underperform traditional funds.

Potter says: “I think multi-asset solutions are an interesting concept but we have to look at what multi-asset really means. It is a few buzzwords linked together and gives the impression of an all-round product that can invest in a number of different areas to achieve the objective. It sounds great. All you do is move more money into bonds before equities collapse and back into equities before bonds collapse but I have rarely come across people who can consistently do that.

“Everyone was calling the end of the world in June but markets got back to a high. Had a multi-asset fund taken a bearish stance in June and moved very defensively in reaction to market views, it would have been caught out.”