By Eugene Goosen: Portfolio Manager of TBI’s Global Multi-Asset Income Fund
Investors today need a balanced mix of growth and security in their portfolios. Multi-asset funds, like TBI Diversified Income Fund of Funds, meet this demand by blending different types of investments—such as stocks, bonds, and cash—into one flexible solution. These funds give managers the ability to adapt as markets change, providing a practical way to handle both risk and returns.
Why Choose Multi-Asset Funds for Diversified Growth?
Multi-asset funds give managers the ability to use different asset classes to build the best suited return and risk profile for their clients: a diversified investment approach that aims for growth while managing risk.
Unlike single-asset funds, which focus on one type of investment, multi-asset funds offer a variety of “tools” that managers can use as needed. Think of it as a toolkit, with each tool representing an investment strategy aimed at meeting specific investor needs.
Key Investment Strategies for Multi-Asset Funds
Multi-asset fund managers combine a range of strategies to create a well-rounded, resilient portfolio.
Here are some of the main approaches used to align with investor goals for growth, income, and capital protection:
Tactical Asset Allocation: Managers use this approach to make short-term changes to the portfolio based on market trends. For example, when the South African bond market recently showed limited upside, fund managers trimmed exposure to bonds, shifting funds temporarily to cash or alike while waiting for stronger opportunities. This kind of tactical adjustment helps keep portfolios responsive to both risks and opportunities.
Absolute Return Strategy: When there’s market uncertainty, absolute return strategies focus on generating steady gains rather than trying to beat a benchmark. Managers look for investments with strong potential for positive returns. If market conditions are risky, they may move assets to safer places like cash, helping protect the fund’s value.
Capital Preservation: This strategy prioritises protecting the original investment, making it ideal for cautious investors. The focus is on stability rather than high returns. Managers may invest in government bonds or money markets to keep the portfolio solid, especially during challenging times.
Income-Focused Strategy: For investors who need steady income, such as retirees, this strategy prioritises income-generating assets like bonds and dividend-paying stocks. The aim is to provide a reliable cash flow while keeping risks low.
Inflation Targeting: As inflation rises, managers may invest in a blend of stocks and bonds to deliver returns that stay ahead of inflation. This approach helps preserve purchasing power, especially for long-term goals like retirement.
Active vs. Passive Management: How Fund Managers Spend Their Time
Many investors wonder how fund managers in multi-asset funds spend their time—what does it mean to be “active” versus “passive” in managing investments?
In multi-asset funds, there’s often a combination of both. Passive management involves tracking an index, which can offer stability, while active management allows managers to adjust assets to maximise returns or manage risk.
At TBI, we monitor market conditions and adjust our portfolios when needed but avoid unnecessary trading. For example, if there’s a shift in bond values due to global events, TBI’s managers might adjust exposure to protect the portfolio.
However, this isn’t day-trading; rather, it’s about making considered decisions over weeks or months, ensuring each move is backed by solid research and strategy. This balanced approach helps investors benefit from both the steady nature of passive strategies and the responsive advantage of active management.
The Multi-Asset Investment Toolkit: Building a Well-Rounded Portfolio
At the heart of multi-asset funds is flexibility. The “toolbox” analogy illustrates this concept well: each tool in the box represents a strategy or asset class that managers can use to create a robust investment solution.
By combining income-focused, equity-focused, and capital preservation strategies, multi-asset funds help investors find the right mix of risk and growth. For example, a retiree might prefer a blend that leans towards income and stability, while a younger investor might favour growth with a moderate risk profile. This versatility is a big reason why multi-asset funds work for a wide range of financial goals.
A Practical Approach to Diversified Investing
Multi-asset funds offer investors a straightforward means of achieving security and growth. With the flexibility to adjust to shifting conditions, these funds provide structured support for preserving capital, generating income, and staying ahead of inflation—an ideal scenario for South African investors.
