Value of multi-asset in today's economic environment

Multi-asset investing isn’t about being the cleverest person in the room — it’s about avoiding being the stupidest. Diversification across different asset classes and regions helps reduce risk and smooth returns by ensuring you are not overly reliant on one or a small number of ideas and strategies.

I use multi-asset portfolios as a core part of client strategies because they are key to helping clients preserve and grow their wealth without taking too much risk. While no approach can remove uncertainty altogether, spreading risk in this way gives clients confidence that their long-term financial goals remain on track, even during short-term market turbulence.

“Multi-asset funds remain valuable in today’s uncertain environment because they provide instant diversification but the real question is what’s under the bonnet. Equities are still dominated by the US giants, with small caps lagging despite long-term outperformance potential. Bonds also need scrutiny: are you in long-dated government gilts, or shorter-dated corporate credit? Currency is another hidden driver for UK investors, a weakening dollar can eat into US returns if not hedged. Multi-asset can work well as a risk smoother, but not all are created equal. It is important to look beyond the label and understand the weighting, the hedging, and the blend of assets to judge whether a fund really offers resilience or just a false sense of diversification.”

Having some flexibility between asset classes is always welcome but it's the nuance within each asset class that really drives the value. I'm looking for competency in both bonds and equities but I tend to find that managers favour one side and underwhelm in the other. It's become more important over the past couple of years as there is such a divergence in returns for short/long duration.

In the current environment, I would say the case for multi-asset investing is stronger than ever. Economic conditions remain unsettled – inflation has proved stickier than policymakers expected, growth is uneven, and the direction of interest rates is still a matter of debate. That sort of uncertainty makes it extremely difficult to place all your faith in one asset class, whether that’s equities, bonds, or property. Multi-asset strategies give investors a way of spreading risk, smoothing returns, and retaining flexibility without having to second-guess every macroeconomic swing. So, while the principle of multi-asset investing hasn’t changed – it remains about balance, discipline, and risk management – the emphasis within it has shifted. Two years ago the challenge was coping with rising yields and inflation; now it is making sure portfolios are positioned to earn a real return without taking on hidden concentrations or illiquidity.