Embracing Market Uncertainty: The Appeal of Multi-Asset Investments

As inflation continues to cool and the Federal Reserve (Fed) indicates a possible end to the rate hikes[1], the market remains unpredictable in the short term. Many investors are looking for medium- or long-term investment solutions in this uncertain investment environment. Multi-asset investment remains a popular choice among investors, allowing them to diversify their portfolios and reduce risk. In this article, we will delve into the reasons why diversified assets are favored by investors and discuss the benefits of multi-asset funds.

Understanding Multi-Asset Funds:

Multi-asset funds are investment vehicles that offer a diversified approach to investing by allocating funds across multiple asset classes, including but not limited to stocks, bonds, real estate, cash, commodities, and alternative assets. It aims to spread risk and capture opportunities across different sectors and regions.

Top 3 Reasons to Consider Multi-Asset Funds:

  1. Diversification and Risk Management: Multi-asset funds provide a more balanced investment approach through diversification across asset classes, reducing the impact of market volatility and reducing risks.For example, in Q3 2023, according to the Hong Kong Monetary Authority, the Exchange Fund reported a record HK$5.5 billion loss[2], but the bond investments within the fund portfolio recorded a profit of HK$15.7 billion while other investments such as stocks and foreign exchange incurred losses. If the Fund had solely invested in the stock market, the losses would have far exceeded HK$5.5 billion. This exemplifies the importance of diversification within a single portfolio to minimize risk.
  2. All Weather Strategy: Whatever the market conditions, multi-asset funds employ flexible portfolio allocation strategies, ensuring an “Offensive and Defensive” approach. Fund managers adjust asset allocations based on market trends, aiming to stabilize returns and manage risks. For instance, when equities perform well, the fund can allocate a higher proportion to stocks, potentially benefiting from capital appreciation. Conversely, during periods of market downturns, the fund can shift allocations towards defensive assets like bonds or cash, aiming to preserve capital. This highlights the advantage of multi-asset funds as they can be actively managed to dynamically adjust asset allocations based on market conditions, further enhancing risk management.
  3. Income Generation and Yield Enhancement: Investors not only seek higher yields but also strive for the stability of portfolio income. Multi-asset Investments can help investors achieve a healthy and stable income by leveraging lower levels of volatility compared to investing in a single asset class. Some multi-asset funds may distribute dividends regularly, with yields potentially exceeding 6%.

Money market funds can potentially serve as a credible investment option in the current market landscape. With their focus on capital preservation, liquidity, and competitive yields, these funds could offer a balanced approach for risk-averse investors. By considering money market funds, investors can navigate the uncertainties of the market while potentially earning a return on their investments and preserving their hard-earned capital.

If you would like to understand this asset class and explore potential investment opportunities to diversify your portfolio, please talk to your financial advisor at OnePlatform Asset Management today.

#Disclaimer and Notes

Investment involves risk.  Investors should carefully consider whether any investment products or services mentioned herein are appropriate for investors in view of their investment experience, objectives, financial resources and circumstances. The information is for general information and reference only and does not constitute nor is it intended to be construed as any professional advice, offer, solicitation or recommendation to deal in any of the securities or investments. OnePlatform Asset Management Limited shall not be liable for any loss or damage caused by any person’s use or misuse of any information or content, or reliance on it. Please consider to seek professional advice before making any investment decision if needed.

Fund products and portfolio management services are distributed and/or rendered by OnePlatform Asset Management Limited (a licensed corporation with SFC CE No. AFQ784).

[1] https://www.bloomberg.com/news/articles/2023-11-17/fed-s-barr-says-recent-data-reinforce-view-that-rates-near-peak

[2]外匯基金第3季投資虧損55億元 首3季投資收益1109億元”, RTHK, 17 November 2023, Link: https://news.rthk.hk/rthk/ch/component/k2/1728228-20231117.htm

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