Zenith has released the 2015 Multi Asset Sector review and the most noticeable message was that the sector participants have forewarned of more challenging market conditions ahead, with headwinds brought by a lower set of return expectations across a range of asset classes.

In turn, many rated managers have suggested it will become increasingly difficult to replicate the lofty returns of the more recent past, providing more conservative guidance with regard to portfolio outcomes in an effort to manage investor expectations.

Faced with the prospect of a more challenging investment landscape to navigate going forward, Zenith’s Head of Multi-Asset and Income Research, Andrew Yap, stated that, “The Zenith research team spent considerable time in the review exploring the concept of the apparent ‘return shortfall’ believing that Strategic Asset Allocation (SAA) – centric managers are most at risk of ‘returns disappointment’ and conversely the measures taken in an effort to enhance portfolio outcomes”.

As a consequence of that the team then considered what impact a resurgence in cross sectional volatility may have on multi-asset portfolios, ensuring that this creates both opportunity and poses threats.

From this analysis Andrew stated that “By critiquing some of the more innovative ways in which sector participants have sought to shield their portfolios from the potential fallout of an unexpected market correction Zenith could then identify how successful these initiatives were in the absence of more traditional sources of portfolio diversification”.

“Key amongst these has been a renewed focus on active manager selection, tactical asset allocation and the incorporation of alternative sources of market beta. Zenith then concluded that no singular ‘silver bullet’ solution existed, and the responses taken will in part be guided by the manager’s investment ideology and flexibility afforded by way of mandate options”.

Finally it was noted that Zenith spent much time on reviewing some of the more contemporary risk- management techniques adopted by managers of multi-asset strategies. In conclusion in a relative context, multi-asset managers continue to be at the forefront of innovation.

Summary of the Zenith 2015 Multi Asset Sector Review:

From an initial universe of 250 funds:
• 8 were rated “Highly Recommended”
• 47 were rated “Recommended”
• 17 were rated “Approved”

Source: Zenith Investment Partners

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