Aug 05, 2019 Multi Asset New

Together we are strong

What is the most important thing to consider when investing? Broad diversification, as they already knew in ancient Rome. Today the same idea in modern form delivers results.

  • A diversified portfolio comprising various asset classes such as stocks, bonds and commodities reduces risk
  • Multi-asset funds deliver this with an all-in-one approach
  • There’s the right fund for every investor profile
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factors determine the success of a portfolio: The right asset class mix and active management

The man not only had a long name, he was also way ahead of his time – Lucius Vibullius Hipparchus Tiberius Claudius Atticus Herodes was a Roman who lived about 1,900 years ago. He owed his wealth, equivalent to about 50 million euros today, to property, stone quarries, olive oil and handling money. In brief: Atticus Herodes went for diversification when investing – and in doing so was an early advocate of the multi-asset approach.

Today this method is backed up by a lot of academic research. In the 1950s, Nobel Prize winner Harry Markowitz calculated, tested and proved that a clever mix of different asset classes such as stocks, bonds and commodities resulted in higher returns at lower risk compared to portfolios invested in just one asset class. This is exactly what is at the heart of the modern multi-asset strategy that is a standard feature of asset management today. 

David Swensen, for example, has managed the assets of the foundation of the prestigious Yale University according to this principle since the mid-1980s. And has done so successfully: Over the years the foundation fund has grown to almost 30 billion dollars in assets.[1] Why? Among other things, because Swensen sees to it that the asset portfolio is broadly diversified. With stocks, bonds and real estate but also, for example, with private equity and hedge funds.


Risk under control instead of risk in control

However, the multi-asset principle also works without complex investment classes such as private equity – thanks to a smart combination of investments that play to their strengths at the different stages of the market cycle, stabilizing the portfolio. A mix of stocks and bonds used to be sufficient. Now commodities are part of the formula. Example: In an equity market downturn, less-volatile assets such as gold are in demand[2] – and they rise in value as a result. Diversification provides stability: A portfolio composed solely of international equity registered a loss in 39 quarters between 1985 and 2014. With a complement of five other asset classes, the number of negative quarters was zero. [3]

Especially in times of heightened uncertainly, this strategy can deliver results. It could be the end of a business cycle but also the nervousness of markets such as that currently being triggered by the trade conflict between the U.S. and China. Keeping risks under control while retaining the opportunity to reap returns is crucial – but almost impossible without specialist knowledge of the individual asset classes.

However, you can rise to the challenge: Appropriate multi-asset funds do the work for the investor. Actively managed by a team of financial experts with the corresponding specialist knowledge. These funds are available with various risk/return profiles and focuses. This means: The right solution can be found for every investor. That was a lot more difficult for Lucius Vibullius Hipparchus Tiberius Claudius Atticus Herodes 1,900 years ago.

Actively managed multi-asset funds are subject to market-, industry- and company-related price risk. 




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1. Source: Yale News, “Investment return of 12.3 % (…)”, October 2018, https://news.yale.edu/2018/10/01/investment-return-123-brings-yale-endowment-value-294-billion

2. Source: Health Wealth Career, “Gold als Anlageklasse (…)”, February 2019, https://www.xetra-gold.com/fileadmin/user_upload/Downloads_Deutsch/Studien/Mercer_Goldstudie_2018_Deutsch_Report.pdf

3. Source: Manning & Napier, “Why asset class diversification is important”, April 2014, https://www.manning-napier.com/insights/blogs/research-library/why-asset-class-diversification-is-important

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