Demand for multi-sector funds is likely to remain elevated in the current volatile environment, with increased interest from larger and more sophisticated investors, according to Standard & Poor’s.
"This is due to an increased emphasis on asset allocation and strategy selection as alternate and more enduring sources of alpha and risk-management, particularly in an investment landscape where active manager selection has become more difficult," S&P stated in its 2011 multi-sector fund review.
The review, comprising 73 headline funds from 24 managers across six peer groups, included no five star ratings, 32 four star ratings, 37 three star ratings and four two star ratings.
S&P Fund Services analyst Andrew Yap said the strategic asset allocation-only format is becoming less typical as managers move toward more flexible investment mandates.
"This permits exposure to alternative assets and strategies, while also incorporating tactical asset allocation to supplement existing alpha sources and control downside risk," he said.
"There has also been a move to introduce more targeted investment solutions, including ‘objective-based absolute return’ and ‘income-orientated’ funds. More dynamic and less constrained in approach, these offerings are in part a response to an increasingly sophisticated investor base, and investors with more specific investment needs," he said.
The report found a number of managers dedicating significant time and resources to bolster their existing multi-sector capabilities, and technical development was also identified as an area of focus.
"Effective multi-sector portfolio managers display a number of investment traits that extend beyond that of single asset-class managers," the report stated.
"Standout portfolio managers have a breadth of knowledge and experience spanning portfolio construction (including implementation processes), macro-economic analysis, regional and developed markets, active asset allocation, strategy, and manager selection."
