Single-asset versus multi-asset performance comparisons

25 August 2015

Mike Turner – Assistant Research Manager for Funds and DFM

In this stats piece I compare asset sectors and wider asset classes using annualised performance, volatility and Sharpe ratios. I’ll be contrasting how multi-asset funds have performed in relation to single-asset funds over the past 10 years and over a shorter period of 5 years. We’ll explore whether multi-asset funds outperform single-asset funds, whether they are less volatile and how they compare on a risk adjusted basis?

Sorted by 10 year annualised performance average % (high to low)

Sector	10 yr annualised performance average %
China/Greater China	10.97
UK Smaller Companies	10.72
European Smaller Companies	9.35
Asia Pacific Excluding Japan	9.16
UK All Companies	7.63
UK Index Linked Gilts	7.43
UK Equity Income	7.29
North America	7.12
Europe Excluding UK	7.05
Global	7.04
£ High Yield	6.73
Europe Including UK	6.59
Flexible Investment	6.44
Mixed Investment 40-85% Shares	6.36
Global Emerging Markets	6.27
£ Strategic Bond	5.24
Mixed Investment 20-60% Shares	5.19
UK Gilts	5.10
£ Corporate Bond	4.93
Global Bonds	4.69
Japan	4.60
Mixed Investment 0-35% Shares	4.55
Global Equity Income	4.28
Property	3.71

From the above we can see that the 10 highest-performing sectors in terms of average 10-year annualised performance are single-asset sectors.

As would be expected, the equity sectors did best and the fixed income sectors didn't do so well, with multi-asset roughly in the middle, apart from 0-35%.

Please note that sectors were excluded from the above table where less than 10 funds in the sector had 10 years performance history. This also applies to the below tables that quote 10 year figures.

If we contrast the above table with 5 year annualised performance we see a similar pattern (see table below).

Sector	5 yr annualised performance average %
UK Smaller Companies	16.87
Japanese Smaller Companies	15.72
North American Smaller Companies	15.51
European Smaller Companies	15.07
North America	14.40
Technology & Telecommunications	13.44
Europe Including UK	12.43
UK Equity Income	11.81
UK All Companies	11.49
Global	9.99
Japan	9.98
UK Equity & Bond Income	9.97
Global Equity Income	9.92
Europe Excluding UK	9.79
UK Index Linked Gilts	9.54
Property	8.87
Mixed Investment 40-85% Shares	7.95
Flexible Investment	7.91
£ High Yield	7.49
Asia Pacific Including Japan	6.81
£ Corporate Bond	6.73
£ Strategic Bond	6.48
Mixed Investment 20-60% Shares	6.41
Protected	6.25
China/Greater China	5.78
UK Gilts	5.53
Asia Pacific Excluding Japan	5.37
Mixed Investment 0-35% Shares	5.32
Absolute Return	4.86
Global Bonds	3.73
Global Emerging Markets Bond	3.21
Global Emerging Markets	0.67
Money Market	0.34
Short Term Money Market	0.20

Let’s take a look at the volatility of the sectors over the same periods:

Sorted by 10 year volatility average % (low to high)

Sector	10 yr Volatility average %
£ Corporate Bond	6.43
Mixed Investment 0-35% Shares	6.50
UK Gilts	6.64
£ Strategic Bond	7.58
UK Index Linked Gilts	8.38
Mixed Investment 20-60% Shares	8.73
Global Bonds	9.63
£ High Yield	10.31
Mixed Investment 40-85% Shares	11.47
Property	11.54
Flexible Investment	12.77
UK Equity Income	13.84
Global Equity Income	14.79
UK All Companies	15.26
Global	15.52
North America	15.65
Japan	16.16
UK Smaller Companies	16.81
Europe Including UK	17.26
Europe Excluding UK	18.75
Asia Pacific Excluding Japan	19.41
European Smaller Companies	19.90
Global Emerging Markets	21.07
China/Greater China	22.04

In the above table we can see that Multi-asset and Fixed Income sectors dominate the top half of the table. As expected, the fixed income sectors and Multi-asset sectors were less volatile and the equity sectors more volatile. We see a similar pattern when looking at 5 year volatility (see table below).

Sector	5 yr Volatility average %
Short Term Money Market	0.06
Money Market	0.20
Mixed Investment 0-35% Shares	4.57
Absolute Return	5.16
£ Corporate Bond	5.53
£ Strategic Bond	5.63
Mixed Investment 20-60% Shares	6.39
UK Gilts	6.47
£ High Yield	7.42
Global Bonds	7.53
Protected	7.53
UK Index Linked Gilts	8.59
Mixed Investment 40-85% Shares	8.93
UK Equity & Bond Income	9.04
Property	9.26
Global Emerging Markets Bond	9.83
Flexible Investment	9.84
UK Equity Income	10.95
Global Equity Income	11.17
Asia Pacific Including Japan	11.96
Global	12.36
UK All Companies	12.49
North America	12.51
UK Smaller Companies	12.64
Japan	13.81
Technology & Telecommunications	14.25
Europe Including UK	14.32
Japanese Smaller Companies	14.75
Asia Pacific Excluding Japan	14.92
North American Smaller Companies	15.17
Global Emerging Markets	15.48
European Smaller Companies	15.60
Europe Excluding UK	15.92
China/Greater China	17.48

Risk adjusted return

Sorted by 10 year Sharpe Ratio (high to low)

Sector	10 yr Sharpe Ratio
UK Index Linked Gilts	0.63
UK Smaller Companies	0.56
China/Greater China	0.52
£ High Yield	0.47
Asia Pacific Excluding Japan	0.45
European Smaller Companies	0.45
UK Gilts	0.45
£ Corporate Bond	0.43
UK Equity Income	0.42
£ Strategic Bond	0.41
UK All Companies	0.41
Mixed Investment 40-85% Shares	0.40
North America	0.40
Flexible Investment	0.39
Global	0.38
Mixed Investment 0-35% Shares	0.38
Mixed Investment 20-60% Shares	0.38
Global Bonds	0.35
Europe Excluding UK	0.34
Europe Including UK	0.34
Global Emerging Markets	0.31
Japan	0.23
Global Equity Income	0.21
Property	0.19

In the above table we see that multi asset sectors are again roughly in the middle of the table. However when looking at 5 year Sharpe ratio we can see in the table below that the majority of multi-asset sectors are contained within the top half of the table with the exception of the Flexible Investment sector which falls just outside the top half.

Sector	5 yr Sharpe Ratio
Property	1.31
UK Smaller Companies	1.29
£ Corporate Bond	1.12
North America	1.08
£ Strategic Bond	1.07
UK Equity & Bond Income	1.05
Mixed Investment 0-35% Shares	1.04
UK Index Linked Gilts	1.04
UK Equity Income	1.03
North American Smaller Companies	0.95
£ High Yield	0.94
Mixed Investment 20-60% Shares	0.93
UK All Companies	0.89
European Smaller Companies	0.87
Technology & Telecommunications	0.87
Absolute Return	0.86
Global Equity Income	0.85
Mixed Investment 40-85% Shares	0.85
Global	0.79
Japanese Smaller Companies	0.79
Flexible Investment	0.78
UK Gilts	0.77
Europe Including UK	0.71
Protected	0.69
Japan	0.65
Europe Excluding UK	0.61
Asia Pacific Including Japan	0.55
Asia Pacific Excluding Japan	0.37
Global Bonds	0.32
China/Greater China	0.31
Global Emerging Markets Bond	0.15
Global Emerging Markets	0.06
Money Market	-5.61
Short Term Money Market	-9.31

Grouped into wider asset classes

	10 yr Sharpe Ratio	5 yr Sharpe Ratio
Multi-Asset	0.39	0.88
Fixed Income	0.42	0.77
Equity	0.39	0.77

The 10 year figures will take into account the 2008 financial crisis and using Sharpe ratio calculated over 10 years we can see that Equity, Bonds and Multi-Asset have produced similar risk adjusted returns.

When we look at five year Sharpe ratios, we can see that multi-asset has delivered the highest risk adjusted returns over the last 5 years.

The multi-asset fund universe presents advisers with an outsourcing package that can be deployed across different client segments. Some offer risk targeting to specific volatility bands and others focus on risk through asset allocation.

Unlike single-asset funds, multi-asset funds provide diversification. They don’t necessarily offer the highest performance in absolute terms but they offer the potential of a smoother experience in terms of volatility when compared against equity funds and potentially higher returns than Bonds.

Single-asset versus multi-asset performance comparisons

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