Steady superannuation inflows and the rising popularity of diversified investment strategies saw total multi-sector fund assets reach $154 billion as at June 2010, according to new research.
Morningstar’s sector wrap on multi-sector funds found that multi-sector growth options were the most popular category, with $86.4 billion of total assets as at June.
The research house’s review covered 51 strategies from 12 fund managers across conservative to aggressive.
“The multi-sector balanced category’s total assets are a distant second, with only a third of the amount of money in the growth category,” Morningstar’s co-head of fund research Tim Murphy said.
“One obvious attraction of multi-sector funds is their ease of use – they provide a one-stop access point for diversifying portfolios across asset classes, geographical locations, market capitalisations, and even investment styles – but it also has to do with the lessons of the global financial crisis.
“If investors didn’t realise it before, then the events of 2008/09 rammed home the importance of the need for a well-balanced portfolio to survive and recover from such extreme events.”
Only BlackRock Global Allocation and Vanguard’s multi-sector options achieved the highest ranking of highly recommended.
BlackRock Balanced, Schroder Balanced and Russell’s multi-sector options were the only managers with a recommended ranking.
“BlackRock’s Dennis Stattman has proven himself over a long period to be one of the best asset allocators in the world, while there will always be a place for a low-cost, diversified, transparent, easy-to-understand fund range like Vanguard’s,” Murphy said.
But Murphy noted there was inconsistency around multi-sector funds.
“Lack of consistency in fund name conventions remains a very significant issue, with labels such as ‘balanced’ and ‘growth’ often meaning very different things from one product to the next,” he said.
“This is a major industry issue, particularly given the magnitude of superannuation contributions flowing into so-called ‘balanced’ and ‘growth’ funds.”
