Wealth Management

Multi-asset funds explained

Adrian Howard
May 14, 2024

Multi-asset funds offer the opportunity to access a diversified investment portfolio with just one fund, so could they be the right choice for you?

At a glance

  • Multi-asset funds mitigate risk by spreading your money across multiple asset classes.
  • These vary depending on the fund but may include equities, corporate bonds, gilts, property and commodities such as gold.
  • Your financial goals, attitude to risk and how long you want to invest for will determine the ideal portfolio mix for you.

Sometimes, the prospect of running an investment portfolio – made up of multiple component parts - can be overwhelming. There’s fund selection to consider, as well as the need for regular reviews and amendments to help your investments stay on track.

For some investors, a multi-asset fund could provide a far more straightforward solution and make it easier for you to grow your wealth over the long term and achieve your financial goals.

Here we answer your questions on multi-asset funds.

What is a multi-asset fund?

Sometimes described as ‘one-stop shops’, multi-asset funds give investors access to a diversified investment portfolio with just one fund.

Rather than simply investing in a portfolio of shares, multi-asset funds invest across a spread of different asset classes. This varies between funds but can include shares (equities), fixed-interest securities such as corporate bonds and gilts, property and commodities such as gold, as well as cash. Geographical diversification can also be achieved by investing in holdings from across the globe.

Why should I invest in a multi-asset fund?

A multi-asset fund could work well for you if you want a simple investment solution. It means that you (and your adviser) don’t get bogged down by all the maintenance that goes with running an investment portfolio, freeing you both up to focus on your wider financial planning.

The funds themselves can be used for any financial goal, whether you’re saving for retirement, your children or grandchildren, or simply feathering your nest.

To maximise tax efficiencies, multi-asset funds can also be held within wrappers such as a pension or Stocks Shares ISA.

How do multi-asset funds work?

Multi-asset funds will either invest directly into a broad variety of assets or use a fund-of-funds approach, where the fund invests in other funds.

How assets are allocated within a multi-asset strategy will depend on the risk profile of the fund. Usually, the split between equities and other asset classes will be a fixed percentage – for example, 60% or 80% equities.

Automatic rebalancing will ensure these asset splits remain consistent, with the risk profile of the fund neither increasing nor decreasing over time.

The right asset allocation for you will depend on your attitude to risk and the length of your investment horizon, as well as your financial goals and circumstances.

Funds that invest the lion’s share of their holdings in equities will potentially achieve higher returns but will carry a higher degree of risk. Funds with a lower proportion of their holdings in equities will normally deliver lower returns but be lower risk.

Usually, the longer your investment time frame, the more risk you can afford to take – this gives your money the best potential to grow, and with time on your side, you should be able to ride out any short-term volatility.

It’s a very personal decision, though. When you work alongside us, we’ll talk to you about your financial goals, help you work out how much risk you’re comfortable taking and recommend the right asset split for you.

Can you lose money in a diversified portfolio?

All investment carries a risk of some kind, and there is the chance that you could still lose money with a well-diversified portfolio. The idea behind diversification though is that by not putting all your eggs in one basket, your overall risk of losses is reduced. This is because different asset classes will perform differently in different economic conditions, so if one asset class falls, you shouldn’t see losses across your entire portfolio. In an ideal situation, you may even see losses in one area offset by gains in another.

We can offer you access to SJP’s range of Polaris multi-asset funds. They are funds of funds, and all funds used are run on an actively managed basis by expert managers.

This means that even though you’ll only be investing into one fund and dealing with paperwork for that fund, your money is likely to be distributed across a number of different ones.

There are currently four funds in the Polaris range – all are focused on aiming to grow your capital over time; however, the risk profile of each is different. Polaris 1 has the lowest risk, while Polaris 4 has the highest.

Polaris 1: 40% invested in equities
Polaris 2: 60% invested in equities
Polaris 3: 80% invested in equities
Polaris 4: 100% invested in equities

The asset mix used in the Polaris solutions is selected by the St James’s Place Investment Committee. The funds typically invest in SJP funds, but some from third parties may be used too.

If you have any questions about multi-asset funds and how they could help you, talk to us.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.