How and why Vanguard’s range of Multi-Asset funds is set to continue to deliver long-term, consistent results for advisers and their clients.

In this exclusive interview with IFA Magazine, Vanguard’s Nick Davis and Mohneet Dhir discuss some of the reasons why Multi-Asset portfolios have become the vehicle of choice for advisers. They also set out a strong case as to why a Multi-Asset approach is well placed to help investors to navigate economic and geopolitical uncertainty and explain how Vanguard are investing in their business to help advisers and their teams to deliver long-term value for their clients.

IFA Magazine: Multi-Asset has increasingly become the investment vehicle of choice amongst UK intermediaries, why is this, and do you think it will continue?

Mohneet: “Multi-Asset investing becoming popular is not a new phenomenon. It’s just that an increasing number of investors have come to realise the value that it adds to portfolios. That’s not just in the short/medium term, but over the longer term as well. Our research suggests that a classic 60/40 portfolio has delivered average annualized returns of close to 8% based on a 100+ year study, dating back to 1901 – including positive calendar year returns in excess of 70% of the time.

 
 

“When you consider that since 1901 until now, we’ve had two world wars, the Great Depression, a cold war and multiple other geopolitical events, the fact that, through all of that, 60/40 portfolios as a whole have come out on the stronger end of the spectrum in terms of returns, is impressive. When we look at the historical picture now, I think investors have come to realise the benefits of “balance” that a Multi-Asset portfolio, like LifeStrategy, provides. This is not just at an equity and bond level, but it is even more apparent when you observe the diversification from each of the sub-asset classes within the equity and bond markets. On the equity side, you get exposure to the markets across some 50 or so countries, plus exposure to different sectors, to growth, and to value securities. Ultimately, you don’t have to decide what your view is on value or growth, with Multi-Asset, you have exposure to both.

“On the fixed income side, you get exposure across the maturity spectrum of fixed income and bonds. Whether central banks are on a rate-hiking cycle or a rate-cutting cycle, you have exposure across that maturity curve. This means that regardless of what shorter-term or longer-term maturity bonds are doing, you have exposure to all of them. Importantly, this means not missing out on opportunities as the market evolves and develops over time through different market cycles.

“Finally, you also have exposure to quality corporate bonds. Our Multi-Asset offerings only invest in highquality fixed income, which means investment grade. This means investors are protected in times of market turbulence or big events where riskier bonds such as high yield, tend to take a lot more of a hit than their investment grade cousins. In this way, not only do we boost diversification, but we also have quality diversification. This has been one of the key factors that has driven investors to Multi-Asset funds and to Vanguard in particular.”

Nick: “One of the main challenges facing adviser firms is the time requirements that come with building inhouse portfolios. The governance, the oversight, and challenge that goes with that, especially in an age of Consumer Duty and increasing regulation, is significant.

 
 

“Of course, some will continue to build their own portfolios. However, for those other firms, who are perhaps more interested in basing client relationships around financial planning, we expect low cost MultiAsset funds to continue to be a fantastic investment vehicle of choice.

“Within that there are different options, with Multi-Asset funds and model portfolios. Both will continue to grow in popularity within the UK market. We’ve started to observe this in other markets internationally as well.”

IFA Magazine: How should investors and intermediaries navigate a volatile and uncertain backdrop to markets?

Mohneet: “One of the main reasons that Multi-Asset solutions have become popular is that, to an extent, they encourage investors to be more disciplined with their approach to investing. If you’re invested in one of the LifeStrategy funds or model portfolios, you’ve got broad exposure, and you don’t necessarily need to tweak the exposure depending on what’s happening in the market.

“However, if you were building your own portfolio, you’re more likely to want to tweak it and often that is the worst thing to do when markets are volatile or uncertain. As we’ve seen over the last few years, things have evolved and changed so fast. Every corner has been difficult to predict, whether that was Russia/ Ukraine, Liz Truss or the situation in Israel/Gaza, uncertainty has been rife. Often the best approach is to remain disciplined and having a Multi-Asset solution encourages you to do just that.

“We think this market volatility is probably going to continue over the next 18 months to two years, largely because markets are still adjusting to the magnitude of interest rate rises over the past few years. It’s been one of the strongest hiking cycles we’ve seen for a long time and markets are still adjusting on the back of it.

“The next stage is likely to be rate cuts. But even with that, you can see the market repricing and expectations seem to change quite frequently. It’s always difficult to predict when that’s going to happen and what the result of that is going to be.

“Often with a Multi-Asset solution, your asset allocation is set. It will give you exposure to whatever market repricing leads to, without having to tweak and make changes without subjecting yourself to market timing. To get the trade right on both sides, going out and coming back in as well, can be really difficult to do – and is often impossible.”

“There is currently a lot of geopolitical and financial uncertainty including inflation and low economic growth. Traditionally, this scenario can be a catalyst for investors to be nervous about investing.

“However, one of the best examples I think we can give is that in 2023, a 60/40 portfolio typically delivered over 10% returns. Heading into 2023, you probably would not have thought that would have been the case. This really shows the importance of trying to tune out that noise and stay the course of your investment plan.”

IFA Magazine: How are Vanguard investing in the business to help financial advisers deliver strong outcomes for their clients?

Nick: “Over the last 12 years or so, we’ve become one of the asset managers of choice for many advisers. We don’t take that for granted. Alongside our existing products such as LifeStrategy, one of the market leaders, we are also investing in our active business and in our index business but also, more importantly, in our client service and offering for advisers. We have always scored very highly here, but we think there is more we can do to continue to push the bar.

“We have been hiring into our product team, our client support team and marketing teams. Critically though, we have been investing in our digital capabilities because we understand that this is an evolving landscape. Asset managers need to be at the forefront of providing that digital client experience. It is a really important part of what we’ve been investing in for the last few years and will continue to do so going forward.

“We are also helping advisers navigate what is an increasingly complex landscape. As an example, we’ve recently launched a program called Vanguard 365. This is an online portal for advisers for CPD, to help understand markets, practice management and other issues or challenges facing their business.

“We also continue to explore new investment solutions that we believe can meet an enduring advisor need. What you will not see from Vanguard is 100 new product launches. There are areas of interest for us of course, particularly in model portfolios, but the most important thing is that any new offer continues to support advisers to help their clients achieve their goals.

“Vanguard are known for low-cost investing. We like to think that we’ve had a really positive impact in the UK, helping investors get better value for money from their solutions. We’ve started to see the results of this in some of the cost competition in the Multi-Asset space. Price competition is great, as it gives clients better outcomes, and more chance of hitting their goals.

“At Vanguard we are very committed to keeping costs down as much as possible with a view to further reducing fees as we build scale in our products. It is common within the industry that when pressure on products starts to build, the cost of solutions go up. Our products are built with scale and endurance in mind so that we can ensure that prices hold or even reduce over time. This gives advisers the peace of mind that they’re not going to need to have difficult conversations with clients about price rises and this is vital as it helps advisers continue to build trust with their clients.”

IFA Magazine: How has the adoption of your LifeStrategy model portfolios been received by advisers?

Nick: “The LifeStrategy model portfolios are coming up to two years old. We have been delighted with the level of adoption we are seeing from advisers and intermediaries. We think the principles behind the LifeStrategy fund range resonate in model portfolios too.

“There is a focus on strategic asset allocation, lowcost investing, diversification and ultimately solutions that deliver what they say they’re going to deliver. We’re one of the fastest growing MPS providers on the market. We appreciate advisers have huge amounts of choice when it comes to investment solutions and are always grateful that advisers continue to trust Vanguard with their client assets. We hope they continue to do so going forward and will do our utmost as a team, to ensure that they feel Vanguard is the right place to entrust their clients’ assets.”

To find out more about Vanguard’s multi-asset investment solutions, please click here

About Mohneet Dhir

Mohneet joined Vanguard’s Portfolio Review Department in October 2018 and is currently a Product Specialist focusing on Multi-Asset products registered in Europe. Prior to joining Vanguard, Mohneet spent over 8 years in the investment industry with 6 years at Nomura Asset Management as a portfolio manager focused on active fixed income, and over 2 years at a fund of funds as a research analyst. Mohneet holds a Bachelors’ degree in Accounting from Middlesex University, and a Masters’ degree in Finance and Financial Law from SOAS, University of London. Mohneet also specializes in ESG investing and holds a certificate in ESG investing from the CFA society.

About Nick Davis

As Multi-Asset Distribution Lead, Vanguard UK, Nick is responsible for Vanguards UK Multi-Asset distribution strategy and client proposition across the UK. Prior to this role, Nick was a consultant relations director in the UK institutional team and before that was responsible for Vanguard’s relationships in the wealth manager channel. Nick began his career at Hargreaves Lansdown, before joining Investec Asset Management’s global bank division. Nick has been at Vanguard since 2012. Nick holds a BCom

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