Multi-asset funds remain a useful tool for investors navigating an uncertain market, but their true value depends on what lies beneath the surface, according to Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning.
Equities are still dominated by the US giants, with small caps lagging despite long-term outperformance potential.
While US and global equities are repeatedly hitting record highs, credit spreads remain at historic tights, and volatility (VIX) is low, there are reasons to be cautious about the US, a note by investment manager Neuberger recently said.
There has been a deterioration in employment and inflation data, the US Federal Reserve has restarted cuts, with markets pricing in 120 bps of cuts over the next 12 months, while the latest US personal consumption expenditures (PCE) inflation for August 2025 showed a headline rate of 2.7 per cent and a core rate of 2.9 per cent — both above the Federal Reserve’s 2 per cent target.
Bonds need scrutiny
Prendergast said bonds also needed scrutiny. Currency is another hidden driver for UK investors, as a weakening dollar can eat into US returns if not hedged.
He added: “Are you in long-dated government gilts, or shorter-dated corporate credit?
“Multi-asset can work well as a risk smoother, but not all are created equal. It is important to look beyond the label and understand the weighting, the hedging, and the blend of assets to judge whether a fund really offers resilience or just a false sense of diversification.”
Echoing Prendergast’s words, Rob Mansfield, an independent financial adviser at Rootes Wealth Management, said having some flexibility between asset classes was always welcome, adding that it was the nuance within each asset class that really drove the value.
Mansfield added: “I’m looking for competency in both bonds and equities, but I tend to find that managers favour one side and underwhelm in the other.
“It’s become more important over the past couple of years as there is such a divergence in returns for short/long duration.”
Advisers like multi-asset because it typically offers diversification across different asset classes and regions, helping to reduce risk and smooth returns, by ensuring investors are not overly reliant on one or a small number of ideas and strategies.
Scott Gallacher, director at Rowley Turton, explained he used multi-asset portfolios as a core part of client strategies because they were key to helping clients preserve and grow their wealth without taking too much risk.
He added: “While no approach can remove uncertainty altogether, spreading risk in this way gives clients confidence that their long-term financial goals remain on track, even during short-term market turbulence.”
Ima Jackson-Obot is deputy features editor at FT Adviser