Graham Bentley: Why multi-asset fund risk labels are essentially meaningless

Investment not about risk but uncertainty

clock • 5 min read

The multi-asset sector is a mess, writes Graham Bentley. Risk suffixes such as 'targeted', 'profiled', 'rated' and so on are so loosely applied to funds as to make them meaningless - and potentially misleading.

Only a minority of funds are managed to a volatility target - and even they are loath to state the targets in their objectives. As I suggested last time, most ‘risk-labelled' funds pay no more than a passing marketing reference to risk targeting, so best you ignore the labels. In fact, you might want to ignore volatility altogether. Volatility is measured by standard deviation - in fact, let's use ‘SD' to keep my word count down. SD tells us by how much members of a group - in our case historical price movements - differ from their average. On a chart, a ‘normal' distribution of value...

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