Aggressive allocation and target maturity funds are seeing demand rise as the popularity of multi-asset funds grows among European investors, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.

Asset managers around Europe are once again making the case for multi-asset funds to help investors navigate ongoing market uncertainty. Various factors, including rising inflation, geopolitical tensions, and peak stock market valuations, are forcing investors to consider ways to diversify and protect their portfolios.

Mixed-asset funds are already a popular choice in various quarters of Europe, a trend that is set to continue this year. In Germany, more than half (54%) of the managers plan to focus their sales efforts on mixed-asset funds over the next 12 to 24 months, according to the research. In Italy, mixed-asset fund sales recorded net new flows of €12.7 billion (US$13.9 billion) in 2021, according to Assogestioni, the local fund association.

At the European level, multi-asset funds saw their assets under management (AUM) grow 12.4% year on year in 2021.¹

“The majority of multi-asset fund assets sit within moderate and cautiously managed strategies. However, it is aggressive allocation—multi-asset approaches that typically focus on high equity exposure—and target maturity funds that have grown at the strongest pace in the past four years,” says Fabrizio Zumbo, director, European asset and wealth management research. From the end of February 2018 to the same point this year, aggressively managed multi-asset funds grew at a CAGR of 15.9%, while target maturity funds experienced asset growth at a CAGR of 17.4%. This compares with similar figures of 9.7% and 4.1% for moderate and cautious approaches respectively.

Multi-asset funds will continue to be evaluated for their ability to provide adequate diversification, portfolio protection, and positive investment returns. Managers operating in the space will be obliged to continue to innovate their approach and provide a robust multi-asset strategy that can weather future market headwinds.

“Work is under way across Europe to see how to best to house alternative and private market strategies for retail investors, including those who favor multi-asset approaches,” says Zumbo, adding that the sustainability component is also gaining momentum in multi-asset strategies, as many managers across Europe are working to expand their environmental, social, and governance value proposition into asset classes other than equity, which currently accounts for the largest portion of European mutual funds AUM.

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¹ Source: Morningstar