Multi-asset investing involves allocating capital to two or more asset classes. Investing in this way offers potential benefits including risk management, diversification and additional flexibility.
Common features of multi-asset strategies
Diversification
Diversification – allocating investment capital in such a way as to avoid over-exposure to particular risks – is a key component of many multi-asset investment strategies. Assets within a specific class may all be susceptible to similar risks, such as changes in market conditions. The considered use of multiple asset classes can protect investors from having ‘all their eggs in one basket’. Similarly, a diversified portfolio may help to reduce volatility, evening out returns over time; when one asset class performs poorly, another may provide higher returns.
Flexibility
Investing in multiple asset classes can provide the opportunity to adapt asset allocations in response to market conditions or other economic indicators. This flexibility offers the potential to increase returns or reduce potential losses, allowing for dynamic management of an investment portfolio.
Risk management
Multi-asset strategies can be tailored to an investor’s specific level of risk tolerance and financial goals, given that a wide variety of assets can be harnessed, each with its own risk and return profiles. The right balance of asset classes may more reliably match an investor’s desired risk level than investment in a single asset class.
Global opportunities
Many multi-asset strategies offer the opportunity to invest globally, providing exposure to a diverse range of economic markets and industries. This might include investing in emerging markets or better aligning a portfolio with an investor’s specific goals.
Simplified management
For some, the prospect of managing a multi-asset investment strategy themselves may seem daunting or time-consuming. Professionally-managed multi-asset strategies give those investors access to more advanced investment strategies without the complexity of multi-asset portfolio management, thereby potentially better meeting their investment aims.
Key considerations
Costs
Multi-asset investments may incur higher ongoing costs owing to the need for more complex management and more frequent trading to maintain the balance of the investment portfolio.
Complexity
Multi-asset strategies are typically perceived as more complex than traditional approaches. This includes potential regulatory and tax implications, the need for careful timing of portfolio rebalancing, and liquidity risks where parts of a portfolio may have lower liquidity.
Management
More complex investment strategies such as multi-asset investing may be more dependent on the skill of the managers involved than simpler strategies. This means that whether an investor’s desired risk level and investment goals are met will depend significantly on the performance of the portfolio manager.
Important information
These opinions should not be construed as investment or other advice and are subject to change. This document is for information purposes only. This is not investment research or a research recommendation for regulatory purposes. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those securities, countries or sectors.
Issued in the UK by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. Newton Investment Management Limited is authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. ‘Newton’ and/or ‘Newton Investment Management’ is a corporate brand which refers to the following group of affiliated companies: Newton Investment Management Limited (NIM), Newton Investment Management North America LLC (NIMNA) and Newton Investment Management Japan Limited (NIMJ). NIMNA was established in 2021 and NIMJ was established in March 2023. MAR006338 Exp: 06/2025
