Dec 10, 2019 Multi Asset

How do multi-asset funds work?

What is the most important thing to consider when investing? Broad diversification? Multi-asset funds are very flexible - theoretically, they can adapt perfectly to any stock market situation.

  • A diversified portfolio comprising various asset classes such as stocks, bonds and commodities reduces risk
  • Multi-asset funds deliver this with an all-in-one approach
  • There’s the right fund for every investor profile
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In the case of multi asset funds, fund managers are allowed to invest in different asset classes. They comprise a mix of equities, bonds, money market securities, real estate assets, commodities, or currencies. Multi asset funds are also referred to as multi-asset funds and represent a kind of supreme discipline within the fund sector.

1. What are the special features of multi asset funds?

Multi asset funds are very flexible and versatile. Theoretically, they can adapt to any stock market situation. If equities are performing well in light of sparkling corporate earnings, they can be assigned a higher weighting within the fund. Where there is sluggish growth, the fund manager may tend to favor bonds in order to benefit from falling interest rates and thus rising bond prices. Thanks to their broad diversification and their mostly sophisticated risk management, multi asset funds generally exhibit a lower level of fluctuation than pure equity funds.

2. What kinds of multi-asset funds are available?

Investors can select from a large number of funds with varying risk/reward profiles. In principle, the higher the equity allocation, the greater the risk. There are dynamic funds that permit a higher equity allocation as well as conservative funds that overweight interest-bearing securities. If precious metals and currencies are included, this generally necessitates a higher level of risk tolerance on the part of the investor.

3. What does the fund manager have to do for a mixed fund?

The managers of multi asset funds aim to generate a reasonable return with a manageable level of risk. The variety of investment options represents a particular challenge here. Fund managers need to find an appropriate balance between the respective asset classes. Risks and opportunities have to be evened out.

4. Who are multi-asset funds suitable for?

Multi-asset funds are primarily suitable for investors who are looking for an all-round investment solution for their money. Multi asset funds are ideal for long-term wealth accumulation, for example in the area of retirement provision. Generally speaking, it is already possible to invest in a mixed fund with relatively small amounts.

5. Risk management for multi-asset funds

A key aspect of a mixed fund is active risk management. This is often neglected by private investors who opt to make their own investment decisions. Here, the avoidance of losses, alongside the systematic utilization of upward phases, is the key success factor.

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