State of the market

Mike Turner, Research Manager (Funds and DFM)

With turbulent equity markets over the past three years, have AUMs in the Multi-asset space increased? In this article we explore the changes in market size of Defaqto’s Multi-asset peer groups over the last three years and look at the Multi-asset market as a whole.

Below illustrates the total assets under management (AUM) for all funds within Defaqto’s Multi-asset peer groups.

We can see that the 40-85% peer group is the largest in terms of AUM for both Multi-Manager Return Focused and Multi-asset Return Focused, followed by 20-60%, then Flexible with the smallest peer group in terms of AUM being the 0-35% peer group. We can also see there has been substantial year on year growth within the Multi-asset Return Focused 40-85% sector.

When contrasting Multi-manager vs Multi-asset, the market size for Multi-asset has grown at a strong rate over the last three years whereas the multi-manager space has remained fairly consistent in size. One of the reasons that could have contributed to the comparably lower growth of AUM within the Multi-manager peer groups is the increase in the number of multi-manager funds that are outcome focused.

Funds that target specific volatility targets are examples of outcome focused funds, by targeting volatility these funds tend not to adhere to traditional sector definitions. Although a strategic asset allocation is implemented to achieve a target volatility, these funds tend to straddle traditional sector definitions which proves challenging to classify using traditional classification methods.

Defaqto classifies volatility targeted funds within Defaqto’s Risk Targeted peer group, which we can see has also grown in AUM over the past three years.

Above we have been looking at total AUM, if we look at the average AUM of the funds within each of the peer groups (see below), we can see that the average fund size within each peer group has generally been increasing each year with the exception of the Multi-asset return focused 0-35% and Multi-manager Flexible peer groups.

In conclusion, equity markets have been turbulent over the past three years and equity prices are at similar levels currently to what they started at three years ago; however, we have seen there has been a general increase in AUM within the Multi-asset space across the same period potentially due to the greater diversification that Multi-asset offers over single asset classes.