Feb 11, 2020 Multi Asset

Multi-asset funds help you weather stormy times

Six men, a rowboat, the Antarctic, and nine new world records – under adverse conditions, a rowing team accomplished what no one person alone could have ever managed to do. Multi-asset funds follow the same principle.

  • Stronger as a team: multi-asset funds combine the strengths of several asset classes.
  • By selectively combining stocks, bonds, and commodities, fund managers can create diverse risk-return profiles.
  • The more precisely these individual asset classes complement each other, the better they achieve the investor’s objective.
4 minutes to read

Jamie Douglas-Hamilton from Scotland, Fiann Paul from Iceland, Cameron Bellamy from South Africa and Colin O’Brady, Andrew Towne, and John Peterson from the U.S.: these six men managed to accomplish something that had never been done before. During #theimpossiblerow in December 2019, they crossed the infamous Drake Passage together – in a nine-meter rowboat. Traversing the distance of more than 1150 kilometers took them 12 days, 1 hour and 45 minutes.

What was Germany’s most popular form of multi-asset fund in 2018?

Source: BVI yearbook 2019 (in German), page 49, as of April 2019 

This waterway between Cape Horn and the northernmost tip of Antarctica is considered one of the world’s most dangerous passageways. Waves over ten meters high, icebergs, fierce winds, and frigid temperatures pushed the men to their limits. In the end, they succeeded. The crew even managed to set nine new world records, including the first row across the Drake Passage and the first row to the Antarctic continent.[1] In doing so, captain Fiann Paul and his team set new standards.

 

Since 2013,

balanced funds have been, by far, the most popular type of investment fund in Germany.

Source: BVI yearbook 2019 (in German), page 48, as of April 2019

The success factors: performance and …

Multi-asset funds are similar in many ways. In setting a new world record in rowing, it was the combination of different strengths that led to success. Multi-asset funds use the same principle when combining different asset classes. Just as each extreme athlete has unique abilities, so does each asset class. Top performance requires the necessary energy to drive the effort. With multi-asset funds, stocks provide this momentum. They offer comparatively high potential returns and supply the dynamics.

Keeping funds on an even keel through the global market’s storms and rough waters, on the other hand, also requires stability. To achieve this, multi-asset funds can include low-risk assets as well if the economic conditions warrant it. Take bonds, for example: although their returns are lower, they can help ensure a balanced portfolio. Just as the record-setting team of rowers had an escort vessel ready to assist in an emergency, DWS multi-asset funds have a team of experts that focuses solely on risk management.

... competency and diligence

For both extremely athletic rowers as well as fund managers, careful navigation and the efficient use of strengths are prerequisites for reaching the goal. The fund manager puts together the best possible team in the same way that a captain does. It’s also their duty to ensure discipline and diligence. The record-setting team of rowers had to keep the boat moving to prevent it from capsizing. To ensure this, captain Fiann Paul and first officer Colin O’Brady organized the crew into 90-minute shifts. In each shift, three men rowed while the other three rested. Applying this analogy to a multi-asset fund: the fund manager’s goal is to continually monitor and, if necessary, alter the percentage of each asset in the portfolio to change the weighting and achieve a better balance between risk and return.

At DWS, the customer determines the optimal balance between possible returns and anticipated risk. By offering its customers a range of multi-asset funds with various risk profiles, DWS enables its customers to choose the best option based on their own personal risk tolerance. Crossing the Drake Passage or participating in other extreme sports is obviously not for everyone, but it’s a well-known fact that Germany’s national rowing team is often on the winner’s podium at rowing championships.

2 factors are decisive for investment success: the combination of asset classes together with active management of the fund.

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1. Source: https://www.guinnessworldrecords.com/news/2019/12/impossible-row-team-achieve-first-ever-row-across-the-drake-passage-604720, as of: December 2019

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