...2014: Poor Performance, but Good Flows The performance of multi-asset (MA) funds was poor in 2014, particularly for flexible funds, which continued to underperform traditional balanced funds and benchmarks. Flexible funds captured only 25% of the market upside in 2014, failing to show the return asymmetry that investors expect from them (typically aiming to capture 40%-50% of upside and avoiding losing more than 20%- 30% of the downside). Nevertheless, flows remained strong, confirming investors' appetite for multi-asset investments. Usual Culprits for Underperformance; New Culprits Emerging As in the past, the culprits for underperformance were tactical asset allocation and traditional downside protection mechanisms proved ineffective for many funds as central bank actions drove market sentiment and changed valuations. The new culprits were fixed-income rally and equity- sector rotation in 2014 which caught many discretionary asset allocators by surprise. Limited Number of Top Performers...
