Active Managers Look to Distinguish Themselves With Multi-Asset-Class Products

Some are building proprietary investment models.

Active managers are looking to redefine their space by creating multi-asset-class products, according to the latest Cerulli Edge report. Some are looking to even build proprietary investment models, Cerulli says.

Twenty-six percent of active managers are building multi-asset-class funds. Of this group, 74% are based on fundamental active management, and the remaining 26% on factor-based management with portfolio manager discretion.

“Gone are the days of developing a basic 60% [equity]/40% [fixed income] balanced fund,” Cerulli says. “Managers’ new initiatives are focused on blending together existing capabilities in equity, fixed income and alternative asset classes to build an asset allocation strategy to serve as an all-inclusive solution for advisers’ portfolio.”

Fifty-eight percent of asset managers offer asset allocations based solely on their own funds, but 50% offer asset allocations based on their own funds plus outside managers. Twenty-one percent are considering developing new asset allocations and populating them with proprietary strategies.

“This approach is particularly intriguing for active managers,” Cerulli says, “because it provides an opportunity to showcase the multi-asset-class capabilities many have spent previous years sharpening.”

BlackRock has even created multi-asset-class capabilities in exchange-traded funds (ETFs), according to Cerulli. “iShares combines equity and bond ETFs to build core tactical target-risk products such as the iShares Core Conservative, Moderate and Aggressive Allocation ETFs, which have accumulated $2.7 billion in assets through 2Q 2017,” the research firm says.

Other firms, such as Principal Financial, have created actively managed multi-asset-class ETFs, Cerulli says.

None of these multi-asset-class products fit into the traditional Morningstar style boxes, Cerulli says. Rather, many are being marketed as risk-based allocations. Among the managers looking to offer multi-asset-class solutions, 24% are planning to offer risk-based solutions in the next 12 months. The rest of the multi-asset-class solutions are focusing on other strategies, such as retirement income and multi-asset income.

These solutions will meet advisers’ expectations, Cerulli says, as 20% plan to increase their allocation to retirement income products to meet the needs of their older clientele.

Details on how to order Cerulli’s full report on multi-asset-class development can be found here.

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