July 4 (The following statement was released by the rating agency)
Fitch Ratings says that multi-asset funds have
recently suffered from asset re-correlation in its H113 multi-asset fund
dashboard and peer-group analysis.
For the first time in three years, equity/bond correlations are positive in
falling markets. Fitch expects multi-asset funds to increasingly have to use
cash, short duration assets or derivative hedging, as there is no obvious place
to hide in the transition to less accommodative monetary policies. As the
transition is unlikely to be a smooth process, multi-asset fund managers will
also be challenged in their ability to adjust portfolios without excessive
In the past 12 months, multi-asset fund performance has primarily been driven by
market liquidity, supported by ECB president Draghi's July 2012 speech and
stimulus measures from the US Federal Reserve. When concerns emerged in mid-May
that the Federal Reserve would reduce market support, it is no surprise that
markets returned to a 'risk-off' phase. Global multi-asset funds have suffered
relatively more than European focused funds, the former being more exposed to
those assets driven by USD liquidity, in particular US high yield, currencies
and emerging market debt.
Multi-asset funds have attracted considerable flows in 2013 to May, totalling
EUR22bn, much greater than 2012 inflows of EUR4bn. Flexible funds, those whose
allocation is solely at the manager's discretion, attracted the majority of
inflows in 2013, totalling approximately EUR11bn.
Fitch's fund sector research is designed for fund investors and intermediaries,
combining a summarised overview of a fund sector's developments with fund peer
group data. It is part of Fitch's on-going commitment to fund research and
ratings. Fitch's fund peer groups include best-selling funds, best performers
and largest funds as well as Fitch's rated funds, domiciled in Europe and
classified as cross-border.
Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund
analysis with rankings and performance data from Lipper, a Thomson Reuters
company. Fitch's Fund Quality Ratings offer an independent, forward-looking
assessment of a fund's key performance and risk attributes and consistency of
longer-term returns, relative to peer group or benchmarks. The ratings focus on
the fund manager's investment process, key fund performance drivers, risk
management, and the quality of the fund's operational infrastructure.
Link to Fitch Ratings' Report: European Multi-Asset Funds Dashboard H113