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Multi-asset investing: a longer term perspective


The world is a profoundly surprising place. That was certainly the case in 2019 – few people predicted a vintage year for both bonds and equities (company shares), with the latter outperforming even as earnings were poor. Already in 2020, we have been taken by surprise by events involving the US and Iran, followed by the coronavirus.


For explanations of the investment terms used throughout this article.

View the glossary

Just as surprising have been the last 10 years. Despite the pessimism that dominated during the financial crisis, it proved to be a wonderful decade – indeed, three decades – for the traditional long-only balanced fund. Equities and bonds have enjoyed stunning bull markets, driving a staggering return for strategies with the traditional static mix of bonds and equities.

Of course, harvesting such magnificent returns required the investor to stay invested. There are countless reasons why that was difficult – scary events such as the banking crisis, the eurozone crisis, flash stockmarket crashes, China’s currency devaluation, elections, Brexit, confusing monetary policy changes and Trump’s trade wars, to name a few.

It wasn’t easy, in other words. Staying invested was the hardest challenge. Those that have done so have been rewarded, and deservedly so.

Looking ahead, however, the journey could be tougher still. Not only can we expect the same sort of worrying events to drive short-term volatility from time to time, but valuations are far less attractive than they were 10 years ago.

Real yields (taking account of inflation) on bonds are very low by historic standards. Given that most coupons (periodic interest payments) are fixed, unless very material deflation occurs, real returns from bonds are likely to be very poor over the coming decade, and probably negative. Even in corporate bonds, the yield advantage compared to gilts (as UK government bonds are known) is close to its narrowest levels in a decade.

As for equities, they too have seen valuations become less attractive in recent years. Although the MSCI World Index of global equities is looking fully valued, most equity markets are not as expensive as they were during the tech bubble at the start of the century. In fact, in the UK, dividend yields on shares are relatively elevated in the context of the past 20 years, but still some way off the extremes of 2009.


Please note that past performance is not a guide to future performance.

Starting valuations are a good guide to equity returns, but with less certainty than bonds, given the scope for profits delivery to vary. Arguments can be made why future profits should be faster or slower than historic averages, depending on the region, but it is reasonable to think that expected returns from equities are lower than they were a decade ago.

Altogether, this leaves us with the least attractive valuations on a traditional equity/bond portfolio than we have seen in the past 40 years. That is a sobering thought for future returns and suggests that investors will need to be both more dynamic and selective to generate the returns they need. Perhaps it is no surprise that this reality may be dawning at the very time that many are turning to those very passive strategies that have performed so well.

The M&G Charity Multi Asset Fund

NAACIF converted to a new CAIF (Charities Authorised Investment Fund) structure on 15 November 2019 and was renamed the M&G Charity Multi Asset Fund. The new CAIF has a wider choice of different global assets in its portfolio, including infrastructure companies, for example, thereby increasing diversification. The fund has been opened to all UK charities, which has begun to attract some interest. Finally, the fund’s annual charges have been reduced from around 0.60% to 0.50% per annum. Please note that under rules set down by the Financial Conduct Authority, we are not permitted to show any performance numbers for the first 12 months of the fund’s existence, unless this is specifically requested. If individual investors have any further questions regarding this fund, please contact Richard Macey directly on 020 3977 3623 or email him at

The value of the M&G Charity Multi Asset Fund’s assets will go down as well as up. This will cause the value of a charity’s investment to fall as well as rise and it may receive back less than it originally invested.

We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser. The views expressed in this document should not be taken as a recommendation, advice or forecast.