Mercer | Beta-Heavy Multi-Asset

Mercer | Beta-Heavy Multi-Asset


Beta-Heavy Multi-Asset: Weighing You Down?

Strong returns across equity and bond markets over the period since the financial crisis have left few major equity or bond markets in “cheap” territory. This makes for a challenging environment for strategies that rely heavily on equity and bond beta as the key source of return.    

Multi-asset strategies rely heavily on market returns across the major equity and bond markets (“beta”) as the key driver of return, with relatively little active management overlay, resulting in fairly static asset allocations. Such strategies will typically be found in the “core” multi-asset universe as well as at the simplistic end of the risk parity universe. These strategies are often anchored on a given split between equity and bond markets with investments largely constrained to positions that benefit if markets rise in value (that is, “long only” investments). 

What Does This Mean for Investors?

Although we don’t think the current market environment lends itself to beta-heavy multi-asset approaches, we recognize that such strategies can make sense for some investors. In particular, heavily fee- and governance-constrained investors may have good reason to allocate to relatively straightforward multi-asset approaches as a low-cost means of achieving a diversified market exposure.

However, investors not facing significant fee and governance constraints should consider reviewing allocations to beta-heavy multi-asset strategies. As noted above, we believe the underlying components of these strategies could be designed to improve the risk-return profile by making use of additional return drivers (such as style-factor exposures), active management, and a broader opportunity set. In particular, we favor more dynamic mandates (for example, idiosyncratic multi-asset or multi-asset credit funds) or strategies driven more by manager alpha and non-traditional return drivers (for example, hedge funds) in the current environment.

 Get the full article (PDF)

Fill out the form below to receive Mercer's white paper  "Beta-Heavy Multi-Asset: Weighing You Down?" by email. If you do not have your pop-up blocker enabled, you will be prompted by your browser to download the report or to view it in a new window. In addition, you will receive an email from Mercer shortly with a link to access the article.

Please enter your details below to receive the article.
*Required Fields
First name is required
Last name is required
Role is required
Email is required Email is invalid
Company name is required
Country is required

I would like to receive communications about products and offerings from Mercer. I understand that I can unsubscribe at any time. 

By clicking Submit, I agree to the use of my personal information according to the Mercer Privacy Statement. I understand that my personal information may be transferred for processing outside my country of residence, where standards of data protection may be different.

There are some errors processing this form. Please check the fields and try again.

Thank you for Submitting. We will get back to you shortly.