Prudential reveals multi-asset funds outperform investor expectations

From: Prudential
Published: Wed Jul 03 2013

Multi-asset fund returns have beaten investors' expectations over the past three years, according to new research from Prudential (1).

The insurer's study of DIY investors – those who self-select the majority of their investments – shows they expected to receive a minimum annualised return of 3.8 per cent on £5,000 invested in a multi-asset fund over the past three years.

However, the vast majority of multi-asset funds have beaten these expectations, with over eight out of ten (84.3 per cent) funds delivering annualised returns of more than 3.8 per cent since 2010 (2).

The average annualised return across all multi-asset funds was 5.4 per cent during this period, whereas those funds managed by Prudential outperformed the market with an average return of 6.4 per cent. Every one of Prudential's multi-asset funds delivered an annualised return of at least 5.8 per cent, while also being 10 per cent less volatile than similar funds over the period.

The Prudential research found that investors with higher than average expectations are also likely to have been satisfied by multi-asset fund returns. Around 26 per cent of investors said they would expect an annualised return of at least 5 per cent over the last three years, which has been achieved by three out of five (61.3 per cent) multi-asset funds.

The size of investment also affects the return investors expect to see. Nearly half (47 per cent) of those with investments of more than £250,000 expected annualised returns of over 5 per cent on their investment funds, compared with only 15 per cent of those holding less than £10,000.

Paul Fidell, investment expert at Prudential, said: "In this challenging economic environment, it's perhaps not surprising that people's expectations for their investment returns have become more modest. But it's interesting to note that they've actually been overly pessimistic, as multi-asset funds have delivered average returns 42 per cent higher than investors' minimum expectations.

"Investors believe that returns over the next three years are likely to be very similar to the last three. The important point though is to carefully select a fund that suits the investor, both in terms of potential return and risk, using financial advice where appropriate to guide the decision.

"Multi-asset funds can be particularly effective for investors looking to manage risk, as spreading money across a range of different assets reduces exposure to any particular individual asset classes."

According to the Prudential study, men have higher expectations than women for multi-asset investment performance. On average, men claimed they would expect a minimum annualised return of 4 per cent over the last three years, compared with women's expectations of just 3.3 per cent.

Notes to editors:
1. Research conducted among 1,074 DIY investors (those who self-select the majority of their investments) by Opinium on behalf of Prudential in January 2013.
2. Market performance based on all balanced (multi-asset) funds with histories of more than three years, as recorded by Morningstar on 17.4.13.

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