Multi-asset funds invest in equities and bonds to spread risk and take advantage of potentially a wider range of investment opportunities than investing in one asset class. They can focus on long-term growth or on producing a regular income, or a combination of both.
These funds can invest flexibly across a wide range of equity and bond markets, giving investors a high level of diversification in one fund. Fund managers consider several factors, including the prevailing economic environment, relative valuations and market sentiment, and focus their portfolios on what they see as the most attractive areas. Some of these funds may use other sophisticated investment methods, so it is important to fully understand the risks before investing.
Capital preservation funds
These funds aim to preserve capital and produce positive annual returns above a cash benchmark by investing across markets and sectors. They may limit the amount they invest in riskier assets, such as equities, to ensure that volatility is reduced.
This approach may appeal to investors who don’t want to risk too much capital but still have the chance to earn an attractive annual return. However, these funds are also unlikely to participate fully in any major stock market rally.
Some multi-asset funds aim to produce an income, focusing only on the most attractive income-producing assets.
Alternative and extended strategy funds
Some funds may invest in other markets, such as commodities, real estate or private equity. They provide experienced investors with alternative sources of returns, allowing them to add diversification away from equity and bond markets. Some of these funds may use other sophisticated investment methods, so it is important to fully understand the risks before investing.