Multi-Asset Article

Building Your DGF for the Journey Ahead

Achieving Your Portfolios Objectives

23 October 2019
1 min read

What You Need to Know

Too many Diversified Growth Funds (DGFs) have left UK investors disappointed with performance. In this paper, we show how a DGF can be designed with clear objectives, constructed using guidelines that are genuinely outcome-oriented, and then managed to achieve its objectives.

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Introduction

DGFs (also known as multi-asset funds) have typically been promoted as a way to achieve equity-like returns with less risk, through diversification and risk management. A second selling point is that they can offer a straightforward way to access a spread of assets and to delegate tactical asset allocation to the asset manager. In the UK, this attractive story has led to the use of DGFs proliferating in both retail and institutional markets. Investors have bought into DGFs for a variety of purposes—for instance, as an equity replacement strategy, as a convenient way to access alternatives, and/or as a mid-life growth vehicle for defined contribution (DC) default solutions.

In fact, the journey for many of these funds has been far from straightforward, and they have been unlucky to face an unusual market environment. Equities have performed better and for longer than normal, and diversification has failed to pay off in the way expected. Overall, DGF returns have been disappointing.

But things could have turned out so differently. With better attention to fundamental design principles by the asset managers, we believe that DGFs should have performed more in line with investors’ expectations, and investors themselves could have had better information to guide their choices. When properly resourced, designed and managed, we believe DGFs can provide attractive, differentiated returns that can’t be easily replicated.

In this paper, we highlight four ways to build a better DGF for the journey ahead.

Past performance does not guarantee future results. The value of investments can fall as well as rise and you may get back less than originally invested.This information reflects the views of AllianceBernstein Limited or its affiliates and sources it believes are reliable as of the date of publication. AllianceBernstein Limited makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realised. The views expressed here may change at any time after the date of publication. This is for informational purposes only and does not constitute investment advice. AllianceBernstein Limited does not provide tax, legal or accounting advice. It does not take an investor’s personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material, or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AllianceBernstein or its affiliates.