By Andreas Zingg, head of multi-asset solutions, Vanguard, Europe

Despite the performance challenges of the past year, multi-asset strategies are in high demand, as a growing number of advisers uncover their cost-efficient, long-term advantages.

Across Europe, multi-asset solutions are among the fastest growing sectors in the management industry, and are forecasted to grow more than 8% per annum1. In Italy and Germany in particular, multi-asset funds are growing rapidly, and currently account for 32% and 28%, respectively, of total fund assets in the two countries2.

For many advisers, multi-asset solutions provide compelling value when compared to the complexity and costs of constructing and managing individual client portfolios in-house. As more advisers shift their focus towards financial planning and enhancing client relationships, they’re leaving asset allocation and security selection in the hands of asset managers and discretionary fund managers (DFMs).

Broader industry trends are also fueling interest in multi-asset solutions, including an increasing awareness of costs among advisers and clients, tighter regulations around suitability and transparency, and a growing desire by clients to exert more control over their investment risk and outcomes.

With Europe and the UK expected to enter a recession in 2023, multi-asset solutions can help diversify risk across different assets, sectors and countries, which historically has helped smooth out returns in times of volatility. In the UK, Germany, Italy and Switzerland, multi-asset funds are expected to grow 5% annually, from $1.3 trillion in 2022 to nearly $2 trillion by 2030.  Demand for outsourced model portfolios is expected to be even stronger, increasing by an estimated 15% annually, from $360bn in 2022 to more than $1.1tn by 2030. Across Europe, the vast majority (85-90%) of model portfolios are still managed in-house; however, the trend is growing among advisers to outsource the management of their MPS assets, especially in the UK market.





AuM in MAFunds

AuM in MPS (outsourced)


AuM in MA Funds

AuM in MPS (outsourced)





































Sources: Associazione Del Resparmio Gestito, Bundesverband Deutscher Investmentgesellschaften, Investment Association, Swiss Fund Data, Boston Consulting Group, Vanguard. Data are in USD.

Why bonds still matter

Much of the focus this year has been on the poor performance of bonds, and their impact on multi-asset strategies.  The steep drawdowns during the second and third quarters were the worst on record, with global bonds falling nearly 17% since the start of the year3.

Crucially for multi-asset strategies, bonds spent most of 2022 simultaneously declining alongside shares. As a result, multi-asset investors have seen little diversification benefits from holding bonds over the short-term. Double-digit inflation and aggressive rate hikes are primarily responsible for the dual decline in shares and bonds; however, we believe a more traditional relationship between the two asset classes will reassert itself over time, and bonds will once again play a stabilising role in multi-asset portfolios.

Simultaneous declines are more common than we think

Historically, simultaneous declines in shares and bonds over short periods of time are not that unusual, as the chart below shows. Since 1995, the monthly nominal total returns for shares and high-quality bonds have both been negative around 13% of the time.  

Source: Vanguard.
Notes: Data reflect rolling total returns for the periods shown, and are based on underlying monthly total returns, with dividends and income re-invested, for the period 1996 to 2022. Global shares are represented by the FTSE All-World Index and global bonds are represented by the hedged Bloomberg Aggregate Index. Returns are in GBP.

Extend out the time horizon, however, and the chances of both asset classes simultaneously falling becomes more and more unlikely, with investors never encountering any three-year span of negative returns across both asset classes (and barely encountering it over any one-year period). In short, holding a diversified portfolio of asset classes remains an effective tool for managing risk over the long term.

The good news is that multi-asset portfolios have typically recovered quickly after these periods, with 60/40 portfolios taking an average of nine months to recoup their losses. Thinking about the current market, we expect 60/40 strategies will take closer to 24-36 months to fully recover in value, given the severity of the losses4.

The enduring value of strategic asset allocation

As economic and market conditions change, it can be tempting to take a more tactical approach through active shifts in asset allocation. Yet short-term responses can have an adverse impact on client portfolio, which can lead to imbalances that leave them less prepared for future market conditions—and ultimately can result in poorer outcomes.

Time and again our research has shown that strategic allocation continues to outperform tactical strategies, especially over longer timeframes, providing investors with higher average nominal returns and a greater level of certainty (lower distribution of outcomes).

Tactical vs strategic allocation strategies: distribution of returns over various time periods

Source: Vanguard calculations using data from Morningstar, Inc. Data is for the period 3 January 2011 to 31 December 2021. Notes: Performance calculated on a NAV-to-NAV basis. Returns calculated in USD with income reinvested and net of fees.

Brighter outlook for multi-asset strategies

Looking ahead, our outlook for multi-asset portfolios continues to improve. According to the VCMM, Vanguard’s proprietary forecasting tool, the estimated 10-year return for a 60/40 portfolio has significantly increased since the end of last year, from 3.5% in December 2021 to 6.6% in September 20225. Although inflation and recessionary concerns will mean market volatility is likely to continue, multi-asset strategies should eventually benefit, with higher interest rates on bonds providing more meaningful levels of income and lower equity valuations offering more attractive entry points for upside growth. 

At Vanguard, all our multi-asset strategies are designed to provide advisers with simple, clear, low-cost building blocks that can be used on their own, or as the core of a well-balanced and diversified portfolio for individual clients. As market conditions change and industry trends develop, our strategic multi-asset solutions rely on time-tested principles that have served investors well for many years. 


1 Source: Boston Consulting Group. Based on projected annualised growth estimates for the period 2021 to 2026. Includes assets under management in mutual funds and multi-asset solutions. For more details, please see “Global Asset Management 2022: From Tailwinds to Turbulence”, May 2022.

2 Sources: Associazione Del Resparmio Gestito, Bundesverband Deutscher Investmentgesellschaften. Data as of June 2022.

3 Calculation based on the total returns of the Bloomberg Global Aggregate Index USD  (unhedged) as at  1 January 2022 and 30 November 2022. All income is assumed to be reinvested. Calculations are in USD.

4 Vanguard calculations, based on data from Robert Shiller’s website, for the period 1920-September 2022. Based on historical performance data for the S&P500 and 10-year US Treasury, based on linear duration approximation. Returns calculated in USD with income reinvested. ‘Recovery’ defined as time taken for portfolios values to reach initial investment value ($1).

5 Source: Vanguard, using VCMM data as at 31 December 2021 and 30 September 2022. Calculations reflect estimated 10-year returns for a 60/40 portfolio comprised of: UK equity (MSCI UK Total Return Index), global ex UK equity (MSCI AC World ex UK Total Return Index GBP), UK bonds (Bloomberg UK Aggregate Index) and global ex UK bonds (Bloomberg Global Aggregate ex UK Index Hedged GBP). UK equity home bias: 25%. UK fixed income home bias: 35%. Home bias assumptions in line with Vanguards’ multi-asset portfolio investment strategy. Returns include income reinvested. Calculations are in GBP.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.

Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.

IMPORTANT: The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. VCMM results will vary with each use and over time.

The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based.

The Vanguard Capital Markets Model® is a proprietary financial simulation tool developed and maintained by Vanguard’s primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include US and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time.

Important information

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