Back in the 1980s and 1990s, the sustained bull markets in bonds and equities meant typical multi-asset strategies, commonly known as ‘balanced funds’, delivered excellent returns. Consisting of fairly static exposures to the two principal asset classes, as time went by their performance was increasingly assessed using peer group rankings, without reference to risk, as opposed to assessing the strategy’s total or real return. The total expense burden to investors also inexorably ratcheted up. Back then, bear markets were cyclical and less extreme. Consequently de-risking was generally not rewarded, or for that matter, valued by investors.
Then the bubble burst. The onset of a secular bear market in the early 2000s, marked a brutal lesson in the risk and reward characteristics of equity markets. This was repeated, to a larger degree a few years later in 2008. Investors who regarded themselves as cautious suffered severe capital losses in some multi-asset funds. ‘Balanced’ these funds were not.
Today’s Brave New World As we move into the middle of the 2010s, what do we feel the world facing multi-asset managers looks like today?
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