Can advisers improve client outcomes by blending investment approaches rather than relying on a single multi-asset solution? Diversifying across managers and styles may broaden sources of return and build more resilient portfolios.
Many advisers are happy with a single well-diversified multi-asset solution for their clients; however, others prefer further diversification. Amidst a world of choice, the challenge for these advisers is deciding how best to combine – or blend – different approaches to meet client needs, support consistent advice and improve the chances of good long-term outcomes.
For some advisers, blending is already a practical reality with clear potential benefits.
- Cost control, by combining higher-conviction active exposure with lower-cost passive or core building blocks where appropriate.
- Better alignment with client needs, by selecting a mix of asset classes, risk profiles, income characteristics and investment styles.
- Lower volatility, by accessing a wider range of return drivers and investment ideas than any single solution is likely to provide on its own.
The fundamental rationale for blending is diversification. A thoughtful blend can diversify not only across asset classes, sectors and geographies, but also across investment processes, portfolio construction approaches and sources of expertise.
Blending can provide:
- A wider range of return drivers across equities, bonds, alternatives, regions and currencies.
- Access to different layers of expertise, including strategic and tactical asset allocation, manager selection and security selection.
- Exposure to varied investment styles, from value and income to quality, growth and momentum.
- A more balanced approach to concentration risk when market leadership narrows or specific themes dominate returns.
The art of the mix
The art of effective blending lies in understanding what each component is designed to do. A blend should not simply be a collection of well-rated funds or familiar provider names. It should be a deliberate combination of complementary solutions, each with a clear purpose in the overall client proposition.
The most compelling blend may often be active with active, provided the components are genuinely differentiated. If two active funds are doing much the same thing, the diversification benefit may be limited. But when advisers combine managers with different styles, time horizons, asset allocation approaches and sources of alpha, the blend can become more powerful than the sum of its parts.
Blending active with active
Active management is not a single, homogenous category. The spectrum runs from deep value to quality growth, from income-focused strategies to total-return approaches, from concentrated portfolios to more diversified ones, and from strategic asset allocators to more dynamic tactical managers.
That breadth creates the opportunity. One active manager may be strongest at identifying long-term secular growth themes. Another may be more valuation-disciplined, more income-orientated or more focused on downside risk. One multi-asset solution may express conviction mainly through asset allocation; another may rely more heavily on underlying fund or security selection.
For advisers, the question is not whether active or passive is universally better. It is whether each component earns its place. Complementary active approaches can broaden the opportunity set, reduce dependence on a single investment view and improve the chances of meeting different client objectives across market cycles.
What to look for in an active blend
A robust active blend should be built with intention. Advisers may want to consider whether the underlying solutions differ meaningfully across:
- Investment style: value, quality, growth, income or blended approaches.
- Portfolio construction: concentration, diversification and risk budgeting.
- Asset allocation: strategic, tactical or a combination of both.
- Risk management: how the manager seeks to protect capital or manage drawdowns.
- Cost and value: whether the fee is justified by differentiated expertise and the role the solution plays in the wider proposition.
Where passive fits in
Typically, when investors are looking to lower costs, passive strategies can play an important role. They offer low-cost, transparent access to broad market exposures and can be useful foundations within a client portfolio. But there are limits to how much diversification can be achieved by a stand-alone passive strategy or blending passive strategies with other passives. Where solutions track similar indices, the underlying exposures may be very similar, even if the provider names differ. In those cases, the blend may reduce provider dependency or cost, but it may do less to diversify and/or enhance the investment outcome.
Why active can power up the blend
Active management can enhance the blending opportunity. Combining passive and active can give advisers broad, efficient market access alongside forward-looking judgement, fundamental research and the flexibility to adapt as conditions change.
This is because active solutions can bring several additional dimensions to a client portfolio:
- Forward-looking positioning based on valuations, fundamentals, earnings prospects, policy direction and macroeconomic conditions.
- Strategic and tactical asset allocation adjustments designed to respond to changing risks and opportunities.
- Security selection that can tilt portfolios towards areas of conviction and away from risks that appear under-rewarded.
- The ability to look beyond index weights, which can be valuable when market leadership narrows or valuations become stretched.
Recent years have underlined this point. Equity market returns have at times been dominated, positively and negatively, by a small group of mega-cap technology stocks. A purely passive approach participates fully in that concentration because it reflects the composition of the index. Active solutions, by contrast, can make deliberate decisions about how much exposure to take, where to diversify and when the balance between opportunity and risk has changed.
Where CT Universal MAP can fit
The CT Universal MAP range is designed to offer access to accessibly priced, actively managed multi-asset portfolios that can sit comfortably as a holistic solution or within a blended adviser proposition. Each fund brings together multiple layers of investment expertise, including strategic asset allocation, tactical asset allocation and security selection investment selection.
Because the range is not tied to a single narrow style, it can flex across different market environments and therefore complement other active or passive components as appropriate. For advisers building diversified client portfolios, CT Universal MAP can act as an active core, a complementary satellite or a cost-conscious building block within a broader blended solution.
The bottom line
Blending is not about adding complexity for its own sake. It is about combining solutions that bring different strengths, managing costs where it matters and giving clients a better chance of staying invested through changing market conditions. In that context, blending active with active, alongside passive where appropriate, can be a powerful way to build more resilient, more purposeful investment propositions.
