Asset funds benefited investors

At the end of 1999 asset allocation funds comprised 6% of the unit trust industry. Asset allocation funds are also referred to as multi asset funds. They are funds that invest across the asset classes; equities, cash, bonds, and listed property – be they local or offshore. According to statistics from ASISA (the association for savings and investment South Africa), multi asset class funds comprise over 51% of the industry as at the end of 2015. Inflows into multi asset class funds remain strong which suggests that the trend towards these funds remains firmly in play.

One reason multi asset funds have become popular was the introduction of the FAIS legislation in 2004. Clients could now take incompetent advisers to the authorities and hold them to account for inappropriate and bad advice, including unsuitable asset allocation. Many advisers opted to use funds where the fund manager makes the asset allocation decision, and focused on ensuring that the chosen funds were suitable for clients based on some kind of risk analysis.

Growth oriented multi asset funds

Multi asset class funds suitable for growth investors would be those in the SA-Multi Asset-Flexible, SA-Multi Asset-High Equity, and Worldwide-Multi Asset-Flexible categories. These are the typical balanced and flexible funds. A growth oriented investor is likely to have a big chunk of their portfolio invested in the JSE, so I have compared the performances of these funds (on average) to the JSE. While the JSE has outperformed the three sector averages, it has done so at significantly higher levels of volatility. The Sharpe measure which considers both risk and return metrics shows that the multi asset funds all did a much better job of converting risk into return.