We have found most surveys classify the Multi-Strategy Fund as ‘growth’, which is somewhat ironic given that it isn’t ‘growthy’ enough to warrant more than a 5% weight in the growth fund. As discussed in some of our other articles, the fund has consistently demonstrated a volatility that is more aligned with core bond funds than equity funds, and it is certainly lower risk than high yield bond strategies - which are routinely classified as ‘income’.
A high-level picture of diversified funds with the inclusion of the Multi-Strategy Fund shows us that at one end of the spectrum the Conservative fund is well suited because the hedge fund provides some additional return, without taking on the risk of pure play equities. At the other end of the spectrum, the Growth fund is suited to the Multi-Strategy Fund as it provides some downside protection, whilst avoiding the low yields on offer with bonds. For the Balanced fund, it’s doing a bit of both - but generally taking a defensive role rather than holding more bonds. Therefore, we suggest moving away from using survey classifications as they often limit our thinking to either ‘growth’ and ‘income’ grouping. Rather, we encourage the more fitting classification, ‘alternative’ hedge funds strategy instead.