The earthquakes caused by the first two are still being felt, while the full impact of the pensions changes are yet to be fully understood, but what is certain is that investors, many still scarred from the crisis, are increasingly demanding specific, actual results rather than just relative performance.
And, as a result you have seen an increase in the number of funds that present a clear, increasingly-specific outcome, and the rise more generally of multi asset as a strategy – evidenced most recently by the announcement by Threadneedle Asset Management that it has launched a multi-asset fund in direct response to the recent pensions changes announced by government and by Brompton Asset Management that it has hired Anthony John to head up its newly expanded multi- asset team.
As Jeremy Roberts, head of UK retail sales at Blackrock put it to Portfolio Adviser recently: “Does a client with £20 000 to invest care about beating a notional benchmark? No, they want to be safe in the knowledge that their goal will be met, whatever that goal is.”
This is especially pertinent in a country like the UK, where baby boomers are barrelling toward retirement weighed down by the knowledge that they are likely to live longer than previous generations. And, as a result, the need not only for an income but also for capital preservation is becoming less and less negotiable.
Indeed, according to Roberts, one of the biggest concerns he has at the moment, is that despite these demographic realities around 68% of people in the UK still keep their money in cash, “That is a problem,” he says.
Long term implications
Asset managers are having to work increasingly hard to find and provide new and innovative products to suit the needs of investors.
“We are in a new world of investments, but there remains too much focus on short term performance, we see performance tables that quote performance over one month, three months, six months, 12 months, but the end customer doesn’t have such a short-term investment horizon, they are looking 10, 12 years ahead; we need to align products and solutions with what the client wants,” Roberts says.
This means, he adds that there is an increasing need to move beyond the world of only funds benchmarked against their particular index.
As Brompton's new head of multi-asset, John, explains it: “With markets increasingly complex and volatile and regulation intensifying, investors recognise the importance of diversification and that multi-asset investing can go a long way to meeting their needs.”
That is not to say that we will see the end of funds as we know them, Roberts is clear that he believes advisers will continue to use funds as the bedrock of the portfolios they put together.
“Advisers will always need the building blocks to overlay their own asset allocation and financial planning to provide a solution to their clients. That won’t change,” he says.
But, asked his view of what the offering from Blackrock will look like in five years, he says: “Will we be working more closely with our clients to develop potentially bespoke solutions, multi asset solutions? Yes. Will our multi asset offering be broader in nature? Yes," he says, adding that index funds have grown in popularity and the power of blending index and active funds is being realised.”
And, he reiterates, all of these changes will have at their core, a desire for a solution, a particular outcome.
As a result of these shifts, discretionary fund managers stand to benefit, as do multi asset and multi manager funds, especially as financial advisers focus increasingly on the advice part of their business and outsource the fund selection and asset allocation parts of their business to others. And, increasingly, it is likely that the market will see more funds tailored to a specific solution, be it an income in retirement, a child’s university fund, or even just a distinct value above inflation.