28. Nov 2019 Multi Asset

Multi-asset funds: a triathlon of successful investment

What do swimming, bicycling and running have in common with multi-asset funds? More than you think!

  • Multi-asset funds enable investors to take advantage of market opportunities and balance risks.
  • The fund manager must simultaneously be an expert in three disciplines: return, risk, and liquidity.
  • Just like a top athlete, the fund manager can’t afford to be weak in any single discipline.
3 minutes to read

7:51:13 – These numbers were illuminated on the display panel in the humid heat of Kailua-Kona as Jan Frodeno crossed the finish line. This winning time earned the top German athlete his third Ironman victory. On October 12, 2019 (local time), Frodeno once again demonstrated how skills in three different disciplines can be synergized into one successful entity.

 

Triathletes must excel in three different disciplines. Professional Ironman competitors must swim 3.8 kilometers, bicycle 180 kilometers and then run a 42.195 kilometers marathon. Only those who master all three can reach their goal. That’s people like Frodeno, who had set himself the goal of setting a new record[1] – which he did. To achieve that, he couldn’t afford to be deficient in any one of the three disciplines.

A sports quiz question: What was the average age of this year’s Hawaii triathlon competitors?

“The key is to always keep your mind focused on the goal,”

Jan Frodeno - Source: DW, Jan Frodeno: „Immer ein Spiel mit dem Limit“, as of: Oktober 2019

Mastering all the disciplines

What is true for triathletes is also true for managers of multi-asset funds. These funds combine various asset classes such as stocks and bonds. Fund managers must excel in the primary discipline: earning a return on investment. This is generally achieved through opportunity-oriented investments such as stocks. However, relying solely on these would be to neglect the second discipline: risk management. How much risk is acceptable varies by fund. DWS therefore offers several multi-asset funds with differing levels of risk. By choosing a risk profile that meets their needs, investors can virtually define the timeframe in which they’d like to reach their goal. To successfully manage risk, fund managers tend to choose low-risk investments such as bonds, and sometimes also gold, for example. In the third discipline, managers must always strive to ensure sufficient liquidity to be able to react quickly. After all, it’s no use to have a great investment opportunity if you lack the liquidity to take advantage of it at that particular moment.

“Having the right mix is the key,” emphasizes Henning Potstada, manager of the DWS Multi Opportunities fund. “In the end, though, flexibility is the decisive factor in ensuring a fund’s long-term success.” Just as a world-class athlete senses the right moment to pedal a bit faster or breathe more deeply during a competition, the multi-asset fund manager must also have a sixth sense for the right moment to take more risk or ease off a bit.

This is not a job for specialists with too narrow a focus: those who only understand the stock market risk outpacing themselves. Merely understanding risk isn’t very helpful when the stock market heats up. For multi-asset fund managers, this means that they must always keep a good overview, try to excel in all the disciplines, and have stamina. Just like the Ironman winner Frodeno: “Jan simply doesn’t have any weaknesses,” says two-time Hawaii winner Normann Stadler in explaining his colleague’s latest victory.[2]

A performance like this also requires having a good team. For a triathlete, that team includes the trainer and physical therapist. For a fund manager, this team includes analysts, risk managers and his fund’s co-managers. The final decision rests on the shoulders of just one person though: the athlete who focuses on reaching the finish line within a given time — and the fund manager who aims for a specific rate of return.

}

More topics

25. Nov 2019 Real Estate

What speaks for real estate despite the price boom

Demand is high, but supply continues to be tight: The price of a lot of real estate – especially residential real estate – is going through the roof. And what now?

20. Nov 2019 Equities

Diversification: many benefits and cost-free

With “good” diversification – a broad capital spread – investors can minimise the risk of losses and enhance their returns.

12. Nov 2019 Sustainability

Investing sustainably: “a win-win-win situation”

Paul Buchwitz, Fund Manager of DWS SDG Global Equities, explains how the environment, companies and investors alike benefit from sustainable investments.

See all Investment Topics

1. Source: DW, Jan Frodeno: „Immer ein Spiel mit dem Limit“, as of: Oktober 2019, https://www.dw.com/de/jan-frodeno-immer-ein-spiel-mit-dem-limit/a-51004744

2. Source: Sport1, „Das steckt hinter Frodenos Märchen“, as of: Oktober 2019, https://www.sport1.de/triathlon/2019/10/ironman-hawaii-jan-frodeno-mit-maerchen-comeback-bei-triathlon

CIO View

This website uses cookies in order to improve user experience. If you close this box or continue browsing, we will assume that you are happy with this. For more information about the cookies we use or to find out how you can disable cookies, see our Cookies Notice.

You are now seeing the Italien version of the page despite being located in USA. You can change the country below.

Other country

Other country