Multi-asset investments are becoming a lesson in irony

In 1996 Alanis Morissette released ‘Ironic’. If you don’t know it, the song describes various life situations followed by the two questions ‘Isn’t it ironic?’ and ‘Don’t you think?’ The problem with the song is that most, if not all, of the given examples do not constitute either situational or literary irony.

For example: ‘A traffic jam when you’re already late. A no-smoking sign on your cigarette break. Ten thousand spoons when all you need is a knife… Isn’t it ironic? Don’t you think?’ Well, no – ironically.

Those are unfortunate situations, sure Alanis, but they are not typically what one would define as ironic. Ten thousand spoons when all you need is a knife in the canteen of a Stainthorp Knives factory – now that could be classed as ironic.

As could the growing complexity of selecting and monitoring multi-asset funds, given that one of the principal drivers of their rapid uptake has been advisers’ desire to strip out costs and risks from their investment advice propositions.

The commercial reality of running a profitable IFA business is changing. The costs of meeting an ever-increasing regulatory burden allied to the potential revenue challenges post-RDR mean more and more advice firms are looking to outsource non-core activities.

It is not very surprising, in light of these developments, that more firms are seriously reconsidering whether investment execution is – after all – a core activity. If fund management groups can demonstrate superior (consistent) performance, most advisers do not have fundamental objections to considering multi-asset funds. Indeed, most expect this approach to become more pronounced over the coming year.

However, having been convinced to move towards the outsourcing route for a number of reasons – but in no small part due to the time, cost and expertise involved in making asset allocation and fund decisions – advisers are finding it increasingly taxing to root out the most appropriate multi-asset funds for clients. They are obliged to compare not just performance but a range of assets, level of true diversification, process and cost in a market awash with ‘me too’ funds and devoid of any clear benchmark.

Ironic, don’t you think?