Some investors may get confused in investment conversations about portfolios which contain more than one asset type (bonds, cash, commodities, equities, precious metals, etc.) because some refer to such a portfolio as a mixed-assets portfolio while others call the same portfolio a multi-asset portfolio. So, what is the difference between these two fund types?
Generally speaking, mixed-assets funds have a long history as one-stop asset allocation products for all investors since these funds invest in a given mixture of bonds and equities (in some cases these funds also have a small bucket for gold). That said, the classic conservative (up to 35% equities/min. 65% bonds), balanced (50/50), or aggressive (min. 65% equities/up to 35% bonds) mixed-assets fund is normally broadly diversified, with the asset allocation meeting the respective risk/return profile of the fund at any given point in time. Nevertheless, the respective equity or bond portion of the portfolio may fluctuate depending on market conditions.
As the financial markets and the respective regulations for mutual funds have evolved over time, the managers of mixed-assets portfolios started to use more asset classes and so-called modern portfolio management techniques to diversify their portfolios even further in an attempt to achieve less volatile performance. Some multi-asset funds claim they are absolute return funds. When it comes to this assertion, it is clear that multi-asset funds often have no restrictions when it comes to the percentage they invest in equities, bonds, or other asset types since they help steer market exposure with derivatives. Nevertheless, multi-asset funds often indicate their target exposure to single asset classes to make it easier for investors to find the right product for their portfolio.
All things considered, one could say that mixed-assets and multi-asset funds generally seek the same objective—investing in a broad, diversified portfolio of different asset types. Nevertheless, the term mixed-assets fund is used to describe a classic long-only portfolio investing in bonds, equities, and cash. Multi-asset funds are the modern version of this since in addition to taking long positions in those asset classes they use derivatives to help manage exposure both long and short.
This article is for information purposes only and does not constitute any investment advice.
The views expressed are the views of the author, not necessarily those of Lipper or LSEG.
