Multi-Asset and Real Return are in demand for 2010
Multi-Asset Real Return (MARR) funds are flooding the market in response to clients’ concern about volatility of investment returns, the need for sustainable growth, and preserving the purchasing power of their capital. Investors remain concerned about putting all of their assets into a single asset class even though stocks have been up sharply over the past year.
The mutual fund industry is bracing for the potential outflows which another equity sell-off will create, and it is launching new funds to meet investor needs. MARR funds seem to be the vehicle of choice. Dozens of new and seemingly innovative multi-asset funds targeting inflation beating returns have been launched in 2010. Asset managers launching MARR funds have ranged from large well known managers to start up boutiques and are coming from the U.S. and throughout Europe.
Last month Alliance Bernstein launched the Multi-Asset Inflation Strategy Fund with the objective to maximize real return. This fund pursues an aggressive investment strategy involving a variety of asset classes. Under normal circumstances, the strategy is expected to invest its assets principally in the following instruments Treasury Inflation-Protected Securities (“TIPS”) and similar bonds issued by governments outside of the U.S., commodities, commodity-related stocks, real estate securities, utility securities, infra-structure related securities, currencies, and securities and derivatives linked to the price of other assets (such as commodities, stock indices and real estate).
January 2010 has seen London based Armstrong Investment Managers launch the IM Armstrong Diversified Real Return fund. This fund is positioned as a comprehensive global asset allocation solution, with a focus on inflation beating returns. Armstrong suggests that the broad opportunity set and dynamic flexibility of this fund creates the potential for much better risk adjusted returns than traditional investments. The Fund seeks long term capital appreciation through a flexible and diversified asset allocation across all global asset classes. The Fund dynamically allocates across both traditional and alternative asset classes gaining exposure, either directly or indirectly, to a range of assets including: cash and near cash, deposits, money market instruments, fixed income, equity, real estate, commodity indices, currencies and private listed equity.
In March 2010 BNY Mellon Asset Management launched their Global Real Return Fund, a multi-asset global absolute return fund. The Fund, a sub-fund of BNY Mellon Global Funds, plc, is managed by London based Newton Investment Management Limited. This fund aims to achieve a total return in excess of a cash benchmark over an investment horizon of three to five years. The Fund will use its ability to invest freely in a wide range of asset classes, aiming to have a reasonably moderate risk exposure at any point in time. With no sector allocation restrictions, the Fund's manager can decide to invest in equities, equity-related securities, fixed income securities, deposits, derivative instruments, cash, money market instruments and cash equivalents.
In May 2010 Pioneer Investments announced the launch of Pioneer Multi-Asset Real Return Fund. The fund’s investment objective is total return and additionally the fund seeks “real return,” considered to be a level of total return that exceeds the rate of inflation over a full market cycle. The fund invests in a variety of global asset classes and sectors, including Treasury Inflation Protected Securities (TIPS), investment-grade and high yield bonds, select commodities, emerging market equity and bonds, and U.S. equities, among other asset classes deemed to represent value in light of perceived risk and changing macroeconomic conditions over time.
The list above shows the range of companies launching these new funds, and the varied approach these funds take. Many fund companies are proclaiming MARR funds will protect their client’s purchasing power when markets are in stress, and grow purchasing power over a cycle. Many are also touting the flexible and dynamic asset allocation process they utilize to achieve these goals. It is no wonder clients are interested in this concept. The question is, “Will MARR funds provide a solution for investors, or are they the latest fad?” The answer is not certain, but if fund companies deliver on what they are promising, this may be a good solution for investors.