It is not obvious to me that a greater reliance on macro is always the right way to go.
Value and price
But price is what you pay and value is what you get back, or not as the case may be, and this is where judgments must be made between various outsourced solutions.
There is clearly no right or wrong way to manage money and there are many examples of average performance or worse from both sides of the theoretical divide, but to suggest that there might be some key fundamental facets that make a multi-asset solution more relevant and superior is really stretching the imagination beyond sound argument.
One of the major arguments put forward by some multi-asset providers is that cost is critical to the performance outcome – this argument holds water, no doubt.
However, merely setting an asset allocation and populating it with the cheapest way you can gain access to those asset classes is not always guaranteed to succeed.
Indeed, costs can be reduced if, rather than using collectives, the multi-asset manager invests directly into individual securities or fixed income instruments, for example. Then yes, optically the ‘cost’ of the solution almost certainly will be a little cheaper.
However, in my view it is just not possible for a manager to know everything and even the fund manager of a collective does not always get it right all the time – and no investment management company has a monopoly on investment talent, so picking individual equities or bonds involves a whole new potential layerof risk.
Fund-of-fund managers, however, can certainly choose to employ experts in their chosen fields and judge their ability to perform with their collectives, maybe paying a little more from the privilege but they can also take comfort for the diversified nature of the portfolios they create.
The established fund-of-fund players also do generally have scale behind them and can legitimately still negotiate rebates on fees which feed back into fund performance and also can access the best institutional share classes. Acting as seed investors can also be beneficial to the fund management industry.
Another observation that is sometimes made about multi-asset over multi-manager is the ability to potentially invest in a wider variety of asset classes, or to target very specific areas of the market than perhaps a traditional fund-of-funds.
