James
Gard:
Every
month,
we
look
at
funds’
trends
in
Europe.
So
today
I’m
delighted
to
have
Matias
Möttölä.
He
is
Director
of
Manager
Research.
Thanks
for
joining
me
today.
So
multi-asset
funds
is
what
we’re
going
to
be
talking
about
today.
They
were
hugely
in
favour
in
the
low
interest
rate
era,
and
now
they’ve
fallen
massively
out
of
favour.
Can
you
discuss
the
broad
trends?
Matias
Möttölä:
Yeah,
James,
that’s
correct.
We
are
really
seeing
a
change
in
investor
preferences.
So,
when
rates
were
low
or
even
negative,
yields
were
low.
Investors
looked
for
options
where
the
expected
return
was
perhaps
a
little
bit
higher,
and
that’s
where
allocation
funds
came
in.
They
obviously
have
different
levels
of
equities.
Even
for
risk
averse
investors,
these
were
the
option
of
choice
for
many
years.
And
then
in
early
2022,
we
started
seeing
yields
go
back
to
what
we
could
call
more
normal
levels.
These
funds
started
seeing
some
losses,
and
also
then
investors
realized
there
are
now
perhaps
money
market
options,
cash
options,
bond
funds
that
might
give
me
some
positive
return,
and
perhaps
I
would
switch
to
them.
And
so
there
is
this
change
that
we’re
seeing,
and
over
the
last
two
years,
really,
allocation
funds
have
been
in
an
outflow
mode.
Gard:
Sure.
So,
the
money
has
gone
out
of
multi-asset
and
into
fixed
income
funds,
money
market
funds,
and
cash
funds.
You
have
said
in
your
report
that
multi-asset
funds
with
an
equity
tilt
have
still
managed
to
do
okay
in
terms
of
flows.
Möttölä:
Yeah.
So,
there
is
really
this
clear
difference
between
allocation
funds
that
have
low
risk,
so
that
would
be
the
cautious
funds,
and
they
typically
have
mostly
bonds
and
money
market
instruments
in
the
portfolio,
and
they
have
lost
assets
as
that
money
has
surely
moved
more
into
bond
funds.
These
are
not
clear
substitutes,
but
close
substitutes.
And
then
on
the
aggressive
side,
that
means
funds
that
have
mostly
equities
in
the
portfolio,
those
allocation
funds
continue
to
win
some
new
inflows.
And
that
is
really
easily
explainable
by
what
is
happening
in
the
macro
environment.
Gard:
Sure.
So,
you
say
that
the
cautious
funds
have
been
the
least
popular.
Is
there
a
connection
between
overall
equity
market
exuberance
and
the
cautious
funds
being
out
of
favour?
Are
people
preferring
to
take
on
more
risk?
Möttölä:
I
would
say,
yeah,
there
is
the
understanding
that
now
these
cautious
funds,
perhaps,
there
are
other
options
if
you
want
on
an
absolute
basis,
let’s
say
a
lower
single
digit
return,
maybe
you
want
to
go
even
into
a
cash
account,
maybe
you
want
to
go
into
a
money
market
or
a
bond
fund.
And
then
the
second
thing
is
that,
of
course,
these
funds
also
suffered
quite
large
losses
in
2022.
And
so
there
are
many
disappointed
investors
out
there
who
surely
also
for
that
reason
wanted
to
look
for
something
else.
Gard:
Sure.
So,
there
is
a
connection
between
lower
performance
and
outflows,
which
you
see
across
the
fund
universe
generally.
So,
I
was
thinking
about
central
banks
and
if
they
start
cutting,
will
multi-asset
funds
come
back
into
favour
or
is
it
not
as
simple
as
that?
Möttölä:
So,
multi-asset
funds
are
obviously
a
good
vehicle
for
long-term
investing.
They
are
kind
of
a
solution,
and
you
can
select
the
type
of
fund
that
has
the
risk
profile
for
your
risk
appetite.
As
you
said,
it
may
well
happen
over
the
next
month
or
at
least
a
year
or
two
that
interest
rates
start
coming
back
down.
That
will
give
a
slight
boost
to
bonds
overall.
What
it
will
do
to
equity
market,
which
is
obviously
driving
many
allocation
funds’
returns,
that
is
harder,
of
course,
to
forecast.
But
at
least
in
that
market,
allocation
funds,
both
sides,
both
the
bond/money
market
side
as
well
as
then
the
equity
side
have
nice
return
prospects
theoretically,
at
least.
So
then
surely,
it
will
be
an
interesting
proposition
again.
Gard:
Sure.
So,
in
summary,
you
would
say
that
multi-asset
funds
still
have
a
role
to
play
for
investors
despite
their
current
unpopularity.
Möttölä:
I
definitely
think
they
have.
And
one
reason
already
is
that
even
if
you
are
a
risk
averse
investor,
just
sticking
to
cash
or
money
market
or
bond
funds
as
a
long-term
investor
doesn’t
often
make
sense.
So,
you
want
to
take
some
risk
to
be
able
to
beat
inflation,
which
should
be
kind
of
the
minimum
target
for
any
investing.
And
for
that,
you
need
equities
as
part
of
your
portfolio
or
some
other
risk
assets,
and
there,
allocation
funds
are
kind
of
a
solution,
a
package
that
you
buy
with
everything
baked
in.
Gard:
Great.
Yeah.
Thanks
very
much.
So,
we’ll
keep
an
eye
on
these
trends
in
the
following
months.
It’s
going
to
be
an
interesting
year
for
the
markets
anyway.
So,
thanks
very
much
for
your
time
and
thank
you
for
your
insights,
Matias.
For
Morningstar,
I’m
James
Gard.
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