AMP Capital Investors' recently-created multi-asset group (AMP MAG) is developing a new version of the balanced fund that aims to generate more stable returns than a traditional balanced fund.
The new product will do this by changing the asset allocation and instead of having the usual allocation of 60 per cent to 80 per cent in equities, it will have no more than 25 per cent in any asset class.
"It's a fund that we are working on under the hood, so to speak," AMP Capital head of MAG David Kiddie said.
The dramatic falls in equity markets during the financial crisis raised the question of whether high exposures to equities are appropriate for balanced funds, which are often used as the default setting for new superannuation investors, and put asset allocation back on the agenda.
The new fund has a much higher exposure to alternative assets and its recent allocation included 14 per cent to hedge funds and 7 per cent to diversified alternatives.
It has just 8 per cent allocated to Australian equities, as well as 8 per cent to emerging market equities.
AMP MAG is currently running the new fund on about $40 million of seed money.
The fund has a long-term target of the consumer price index plus 5 per cent, although clients can set their own targets under bespoke mandates.
"I love to have clients with different objectives. That is what the multi-asset group is all about: trying to understand all those objectives," Kiddie said.
Under the new product, AMP Capital chief economist Shane Oliver and his team will contribute ideas to the asset allocation process, while AMP Capital investment director of multi-manager and investment solutions Sean Henaghan's team will be responsible for portfolio construction.
"By putting Shane's team with Sean's team you facilitate much better information sharing and understanding of earning drivers and market drivers, so you can incorporate those asset allocation views in all of our portfolios," Kiddie, who joined the company in October last year, said.
"We are not going as far as to say Shane's team like the outlook of the American economy and, therefore, Sean's team has to be overweight, but by putting them together we are undoubtedly getting much better investment input."
AMP MAG is currently in discussion with external clients about the new fund and said the initial feedback was encouraging.
"We have the consultants looking at it and we've been talking about it with a few external clients to see what they think of the construction," Kiddie said.
"One client said it was groundbreaking. Groundbreaking is great, but it also implies there is some education to do."
