Multi-asset funds: strategies for every investor

By Chris Salih on 26 May 2025 in Multi-Asset, Basics

Multi-asset funds: strategies for every investor

No one knows for sure how different asset classes will perform. That’s why it makes sense to have exposure to a few within your overall portfolio. This is where multi-asset funds have a crucial role to play. They spread investors’ money across areas such as equities, bonds, property and commodities. This diversified approach should lower your risk as losses suffered in one area will hopefully be counterbalanced by gains elsewhere, as long as assets held are uncorrelated.

However, there are lots of different types of multi-asset funds. You can have conservative, balanced or aggressive portfolios, as well as those focused on income, growth and alternative investments.

Below, we look at how these funds work, the various pros and cons, and how to choose the right portfolio for your needs.

Why choose multi-asset funds?

The first point is that you can create your own broad, multi-asset portfolio by choosing a variety of individual holdings. The benefit is you’ll get to choose exactly what you hold. However, this will require a significant amount of knowledge, experience to make the right investment decisions, as well as time to constantly monitor the calls.

A less stressful – and more popular – approach is to opt for a multi-asset fund and benefit from having a professional fund manager making the calls on your behalf.  Most investors drawn to these portfolios will be after steady, reliable returns, rather than wanting to shoot the lights out with a high-risk, high-reward approach.

Let’s now look at some of the other reasons why opting for a multi-asset fund can make sense.

• Diversification: A decent multi-asset fund will normally hold equities (shares), bonds, property, commodities and cash.
• Risk management: Having a variety of assets means the risk being taken is spread across different areas. Losses in one of them, therefore, can be cushioned by gains made elsewhere.
• Strategic investment: Investors can choose a multi-asset fund that can help achieve their goals, whether that’s a core/satellite approach, growth or capital preservation.
• Simplicity: You can build your own multi-asset portfolio by buying individual assets, but a dedicated fund is simpler – and is usually run by a professional manager.

Understanding multi-asset funds

Unlike funds that are focused on a single area, such as equities, multi-asset funds can invest in a wider variety. While the specific allocations will vary between funds, there will usually be a mix of equities, bonds, property and cash, as well as some alternatives, such as commodities. However, not all multi-asset funds will be the same. Some may just have equities and bonds, for example, which is why it’s important to understand their holdings.

A good starting point is looking at the specialist sectors established by the Investment Association that have set limits on equity exposure allowed. These are: IA Mixed Investment 0-35% shares; IA Mixed Investment 20-60% shares; IA Mixed Investment 40-85% shares; and IA Flexible Investment, which doesn’t have limits.

Such funds will differ in their approaches. Some will buy individual assets, while others take a multi-manager approach and hold other funds instead. They may also use financial tools such as options and swaps to hedge risk.

How to evaluate multi-asset funds

As we have discussed, there are plenty of benefits to multi-asset funds. Unfortunately, there are also some challenges when it comes to evaluating them.

The fact that they invest in different asset classes – with varying exposures to each of them – can make it extremely difficult to compare like with like. For example, one fund may have substantially outperformed another over the past year, but it may be due to having a higher concentration of equities during a stock market boom.

So, what can you do? Well, here are a few things to consider when trying to find the best multi asset funds available.

• Understand its objective: What is it trying to achieve? Do the fund’s goals meet your requirements? Are you happy with the allocations given to each of the major asset classes?
• Examine past performance: While it doesn’t guarantee future success, it shows whether a fund has been successfully run over various time periods.
• Research the fund manager: This is crucial. The person at the helm will be largely responsible for the performance, so see how they’ve performed in the past and explore their investment approach.
• Consider financial metrics: You can also consider various financial measures. These include total returns, risk-adjusted returns and volatility. Examining these factors will give an insight into how a fund has been run.
• Assess cost and fees: There are various costs involved – and these can have a significant bearing on the returns. Pay attention to management fees, total expense ratios and any performance charges that apply.

How to start investing in multi-asset funds

Before choosing a multi-asset fund, there are a few steps to consider. These will help ensure you’re on the right path and enable you to pick the right portfolio for your circumstances.

Understand your goals

What are you trying to achieve? What returns do you need from your multi-asset funds to meet these financial objectives? Are you looking to increase or maintain your wealth?

Know your risk appetite

What would be the impact on your financial wellbeing if you lost everything you invested? For example, if it would be devastating then you may want funds with higher allocations to safer assets.

Decide your asset allocation

Your preferred asset allocation – that means the combination of assets you want in a portfolio – will be based on your answers to the previous sections.

Choose a multi-asset fund

The final job is to actually choose a multi-asset fund. There are plenty to choose from but FundCalibre can make the task a lot easier as we have already researched these portfolios. You can see our views on individual funds and investor types they may suit.

Multi-asset fund investment strategies

Multi-asset funds can also be used as part of different investment strategies.

For example, your goal may be to generate an extra revenue stream. In that case, you’ll want to focus on the best multi-asset income funds. Alternatively, you may want to grow your investment, which would mean opting for a manager with more of an equity focus – especially exposure to fast-developing companies and sectors.

Capital preservation is another popular investment strategy, particularly for those approaching a financial target or nearing retirement. These types of multi-asset funds are likely to be more heavily invested in government and higher-quality corporate bonds.

Other strategies include active versus passive. Active funds will be run by a manager whose job it is to make the various buy-sell decisions. Passive, meanwhile, can be set up to simply track the performance of an index, like the FTSE 100. As there’s less decision-making involved, such funds are a lot cheaper.

Multi-asset funds can also be used within the core and satellite approach. This is where you have a diversified core of reliable, steady investments – and then more exciting funds for some extra spice.

Common pitfalls in multi-asset fund investing

Multi-asset funds can be terrific tools for investors to generate diversified returns, but there are some potential pitfalls to avoid.

Firstly, don’t make the mistake of believing that all multi-asset portfolios have the same risk-return characteristics. Just because it’s diversified doesn’t mean it’s automatically low risk. Therefore, ensure you know exactly how much risk the fund is taking and decide whether or not you’re comfortable investing in such a portfolio.

Another error is ignoring costs. Ensure you know exactly how much these portfolios will cost you, such as management charges and any performance fees. Remember, if your chosen fund takes a multi-manager approach – meaning they buy other funds, as opposed to individual assets – charges are likely to be higher.

Then there are the emotional factors. Avoid choosing a fund based solely on its recent performance as there are plenty of reasons why it may have done well – or badly. Similarly, don’t axe a fund immediately on a period of outperformance without understanding why that happened – and whether it was due to the manager or broader economic factors.

Monitoring and adjusting your portfolio

It can be very easy to leave your multi-asset fund alone and trust that its manager will continue delivering risk-adjusted returns from a variety of asset classes. However, you do so at your peril. Even professional managers can get their allocations wrong, so you need to monitor their performance to see how they’re shaping up.

Before you can accurately monitor a portfolio, you need to be clear on what you’re expecting it to achieve in terms of returns and risk tolerance. Next, you need to look at how the actual performance stacks up to what you hoped it would achieve. Using metrics such as total return and volatility may be useful here. It’s also important to understand the reasons behind the returns. Were they high due to a specific event – such as a sector having a one-off boom – or low due to isolated problems?

Then you can review the asset allocation. Is it still as expected? Are you happy with the holdings or do you think the manager has moved too far away with his positioning?

How FundCalibre enhances your multi-asset fund strategy

When you type multi-asset funds UK into a search engine you’ll be met with a dizzying number of potential investments. So, where do you start?

Well, FundCalibre can help you narrow down the potential investment universe and choose the funds that will best meet your multi-asset strategy. Our expert team scrutinises more than 3,000 funds and trusts to produce a preferred list of just 200, spread across different sectors.

While an Elite Rating does not constitute a recommendation to buy or sell, the knowledge that professional analysts have analysed a fund in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.

FAQs: Answers to common questions about investing for beginners

• What exactly are multi-asset funds?

  • These portfolios provide exposure to a variety of assets within one fund. They will usually include equities, fixed income, property and commodities.

• What are the main benefits of investing in multi-asset funds?

• • The principal benefit of a multi-asset fund is being able to hold a diversified spread of assets within the one portfolio. This also makes it simpler to manage.

• How can I evaluate the performance of a multi-asset fund?

  • While the returns generated will be the most important factor, other financial factors such as volatility can provide useful insights into a fund’s performance.

• How much should I invest in multi-asset funds to begin with?

  • You can start off small and invest more when you feel comfortable. Pound cost averaging, in which you pay a set amount each month to buy units in a fund, is a good way to build up your investment without worrying about timing.

• Can multi-asset funds be part of an ethical investment strategy?

  • Yes. It’s possible to select multi-asset funds whose managers adhere to ethical and sustainable criteria. However, you’ll need to research individual portfolios – or use FundCalibre – to establish which ones take this approach.

• How are multi-asset funds taxed in the UK?

  • Multi-asset funds are subject to capital gains tax (CGT) when you sell your investment for a profit, but tax-efficient accounts like ISAs and pensions can shield gains from taxation. You must always check specific tax rules or consult a financial adviser for personalised guidance.

Are multi-asset funds the right choice for you?

Let’s recap the benefits of multi-asset funds. These are: diversification, risk management and simplicity, as well as being able to help pursue investment strategies. They are particularly attractive to investors that appreciate the qualities of a diversified portfolio but haven’t got the time or research capability to make the individual calls.

Multi-asset funds, therefore, are suitable for a wide variety of investors, including those wanting a one-stop-shop approach, as well as those looking to build longer-term wealth. The fact that you can choose funds to suit different risk appetites and objectives, such as income, growth and balanced, is another plus point.

Conclusion

Multi-asset funds are a convenient way to get access to a diversified portfolio that’s run on a daily basis by a professional manager. These individuals will be responsible for altering the asset allocation mix – within the boundaries laid down by the investment management firm – and choosing the holdings.

However, investors need to carry out their own research, with the help of FundCalibre’s team of experts, to decide which funds most meet their needs. Multi-asset funds are likely to differ enormously from one another so you need to decide what you want from this approach – and then search for the most suitable portfolio.