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We are living through turbulent times with major political change at home, simmering trade disputes between the world’s two largest economies and a slowdown in global economic growth. We know from our adviser community that this is understandably making some clients feel anxious about their investments.

It is important in more uncertain times to take stock and adopt a measured rather than a knee-jerk response to a changing political and economic environment. Times of change can provide an opportunity for advisers to talk to clients about the critical issue of risk, which inevitably comes into sharper focus when markets move into a different phase after several years of low volatility and steady returns.

In this latest edition of FundsTalk, we focus on different aspects of multi-asset funds, which are growing in popularity as clients seek to diversify their investments as a way to manage risk. The first article goes back to the beginnings of modern portfolio theory in 1952 and sums up how diversification can help manage risk within an investment portfolio. It also explains the reasons behind increased inflows into multi-asset funds and a proliferation in the number and type of multi-asset funds available.

I sat down with the FundsTalk team for a wide-ranging Q&A session on our family of funds, providing an overview of our different offerings, their particular characteristics and their aims, which you will find in the second article. Asset allocation is one of our key strengths and so we have provided some insights into how our team operates.

Our next piece looks at ‘smart beta’ indices which we use within our Premier Portfolios. Scottish Widows was a relatively early adopter of smart beta strategies. We use the FTSE RAFI Index Series, which were some of the first smart beta index-based strategies in the market. The methodology selects and weights index constituents according to fundamental measures of companies, such as total cash dividends, free cash flow, total sales, and book equity value rather than by the traditional market-capitalisation method. We hope you find it useful to learn more about this aspect of investing.

Finally, we take a look at the factors that are likely to influence multi-asset funds in future such as changing demographics, regulation and an increasing focus on socially responsible investment. An ageing population is expected to change the nature of retirement, with people either working longer or opting for phased retirement, which has implications for income requirements from retirement savings. Transparency over charges and cost structures will also be in the spotlight as regulators demand more openness and clients seek value for money.

Socially responsible investment will also impact multi-asset funds in future, whether it is the mix of assets or stewardship issues – it is already rising up investors’ agendas and this is likely to increase as more millennials become savers.

Iain McGowan

Head of Fund Proposition, IS&E


Written by

IAIN MCGOWAN | Head of Fund Proposition

Other articles in this edition

What’s fuelling the rise of multi-asset funds?

Find out why multi-asset funds are becoming increasingly popular among investors seeking to manage risk and protect capital, while also targeting growth.

Scottish Widows Family of Funds

In this Q&A with our Head of Fund Proposition IS&E you’ll find out more about our fund ranges, which have been designed to meet the needs of individual pension customers and those in workplace pension schemes.

What’s driving increasing adoption of smart-beta strategies?

This article looks at how smart beta index strategies work and why adoption of these strategies has reached record levels.

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