Multi Asset Allocation Funds — Diversification Bought Ready-Made

The defining rule is a minimum number of asset classes with a minimum share in each, which is what separates this from other hybrid arrangements.

Most schemes here use equity, debt and gold, and some add another element on top. What matters is that the scheme cannot abandon any of them entirely, so a genuine spread is maintained even when one of them has been unrewarding for a long stretch.

Within those minimums the manager has room, and how much room differs considerably between schemes. Two schemes in this category can carry quite different equity levels while both complying, which is why our page on the fact sheet matters more here than the category label.

Not because gold is expected to grow the portfolio, and any scheme presented that way is being oversold.

Gold is in the mix because it does not always move with equity, and something that behaves differently is what diversification actually means. In stretches where equity is falling, an allocation that is not falling in the same way steadies the whole holding.

That is a modest and genuine role. Our page on gold versus mutual funds covers the wider question, including the fact that in this state most households already hold gold in a form they will never sell, which is worth counting before adding more.

It does something almost nobody does by hand, and it does it without asking permission.

Rebalancing means selling part of whatever has done well and adding to whatever has not, which is correct and emotionally very hard, as our page on portfolio rebalancing discusses. Inside a scheme it happens mechanically and you never see the decision.

There is a second benefit that people undervalue. Doing it yourself across separate holdings means selling, which carries exit load and tax each time. Inside the scheme, the rebalancing does not create those events for you.

For a household that would otherwise hold three things and never adjust them, this is a real service rather than a packaging exercise.

Three things, and the first is the one that matters most on this site.

The allocation decision. Everything we have written argues that the split should follow from your dates and your circumstances, as our page on asset allocation sets out. A scheme knows none of that and applies its own ranges to everybody who buys it.

Visibility. Your actual exposure changes when the scheme changes it, which is the point, and it means you have to read the fact sheet to know what you currently hold rather than knowing by construction.

The ability to place each part deliberately. Somebody holding equity, debt and gold separately can put each in the right place for their own horizon. A single scheme applies one arrangement to all of it.

Three categories get confused here and the distinction is not subtle once stated.

A balanced advantage scheme varies between two asset classes according to a model. A multi asset scheme must hold at least three, with minimums that stop any of them disappearing. An ordinary hybrid scheme holds two in a stated band.

There is also the question of whether a scheme reaches its gold exposure directly or through another fund, which affects both cost and tax treatment. That is checkable in the documents and it is worth checking, as our page on fund of funds explains.

The required minimum in each asset class is the feature that actually distinguishes this category, and it shows itself at the uncomfortable moments.

When one of the three has done badly for a long period, the scheme cannot abandon it. It must keep at least the stated share, and rebalancing means it is adding to that share while it is unpopular. From the outside that looks like the scheme holding on to something everybody has stopped talking about.

That is the arrangement working as intended rather than failing. The whole reason for holding several unrelated things is that you do not know in advance which one will be needed, and a scheme permitted to drop the unpopular one would simply chase whatever had done well recently.

Where it becomes a genuine limitation is if you disagree with the minimums themselves. Somebody who would prefer no gold exposure at all cannot express that inside this category, and should hold the parts separately instead.

A narrower group than the marketing suggests, in our experience.

• Somebody who wants one holding rather than several and will genuinely leave it alone.
• A household that would never rebalance a set of separate holdings, which is most households.
• Money with a medium horizon where a full equity swing is unwelcome.

One situation where a single spread holding suits particularly well is money being accumulated towards something whose date is not fully in your control, such as the capital described on our page about saving to start a business.

Where we would question it is as an addition to a portfolio that already holds equity, debt and gold separately, since it duplicates all three invisibly, which our page on portfolio overlap covers. Before using one, check the current allocation, the ranges the scheme is permitted, how the gold exposure is held, and the total cost. We are distributors rather than investment advisers and we recommend no schemes, but if you want to work out whether one holding or three suits you better, get in touch.