Suitability, active asset allocation, simplicity and cost-effectiveness are the foundations of an effective multi-asset investment process, says Legal & General Investment Management (LGIM) multi-asset manager Justin Onuekwusi in this video interview.
Asked by Professional Adviser editor Julian Marr in the above video what he believes investors are looking for from a multi-asset fund, Onuekwusi (pictured) refers to research LGIM carried out both before and since its range of multi-asset index funds were launched in 2013.
The themes that keep recurring in conversations with advisers and other investors, he says, are the ones of suitability, active asset allocation, simplicity and cost-effectiveness that form the "four pillars" of LGIM's multi-asset investment process.
"The first of these 'pillars' requires advisers ensure investments are suitable for a client's attitude to risk - both on an initial and an ongoing basis," Onuekwusi explains. "It's not good enough to have initial suitability with an investment only to allow it to drift across risk profiles over time. This process has to be ongoing."
Onuekwusi goes on to say advisers recognise asset allocation as the key driver of both risk and return in a multi-asset portfolio, which signals the need for an active approach.
He adds: "Advisers have told us they want their fund manager to mitigate risk on the downside but also to seek opportunities in the markets by being active and dynamic in their asset allocation."
Simplicity aids investor and adviser understanding, thereby allowing effective due-diligence, Onuekwusi adds, while on cost-effectiveness he says: "Given the unbundled world we now live in, there is greater visibility of costs and advisers recognise these are a key detractor of returns over time."
Illustrating how the 'four pillars' work in the context of LGIM's multi-asset index range, Onuekwusi says the fact the funds are risk-targeted ticks the suitability box while simplicity and cost-effectiveness tend to go hand-in-hand with index funds.
He adds: "At the same time, the 25-strong team managing more than £30bn in multi-asset index funds at LGIM allows for dynamic active asset allocation."
To watch the first interview in this series, 'Weathering the investment storm' through multi-asset, please click here.
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