The multi-asset sector needs clarity in its definition and is a nightmare for investors, argues Rathbones head of multi asset David Coombs.
Coombs, who is at the helm of the firm’s £375 multi-asset range, says the sector has exploded and has no real cohesion. “You’ve got multi manager in there, the derivative type of funds, like GARS for example. So it is a nightmare for buyers and investors.”
Coombs says the term multi-asset itself has become “relatively meaningless” arguing the multi-manager category shouldn’t be included in it.
He says: “Multi-asset has been around for a long time, it used to be called ‘balanced’. It has become a term like hedge fund, it is a relatively meaningless term.”
Coombs argues multi-manager should be taken aside from multi asset.
“A lot of multi-manager funds don’t do asset allocation, they just try to generate alpha from the managers,” Coombs says, stating it is a difficult process. “I’ll never try to do that, I think it is almost impossible.”
In the last year Rathbones has moved from multi-manager to invest directly into large-cap UK and international equities, as well as sterling investment-grade bonds, rather than accessing them through other actively-managed funds.
Coombs says: “I ran multi manager funds for a while, but I converted it because I felt multi-manager was difficult because you don’t have such a great handle on the risk because the underlying managers are doing what they are doing, you find them sometimes at odds to your views.The range also lowered its charges to 0.5 per cent, from 0.75 per cent.
“So I moved to direct because I knew what was in my fund on the daily basis, and how it is performing and position accordingly and I have a much lower total account cost.”
Coombs remarks follow a recent study from consultancy firm Finalytiq which claims “unskillful” multi-asset managers do not add value to their clients’ portfolios and “systematically” damage their returns.
Experts have flagged on the unfairness of comparing funds with different targets as well as those ranging from the lower risk to the higher risk.
Coombs says:”I think a lot of these multi asset funds have come together through all sorts of reasons, mostly commercial and I think they are badly thought through and badly designed.
“You need to design multi-asset funds in a world of zero to negative interest rates which is where we are in the next five years and they are quite hard to run as multi-asset means you have the broadest possible universe.”