2020 taught investors many lessons in the capital markets. One resounding theme: you can’t have too much concentrated exposure. In this case, it was too much equities exposure, underscoring the prescience for a multi-asset strategy via ETFs like the Invesco Balanced Multi-Asset Allocation ETF (PSMB).

While a multi-asset strategy might sound well and good, how does an investor choose which assets to incorporate in his or her portfolio? That’s where the active management component of PSMB comes into play.

In short, active management can help ETFs be even more dynamic. With the ability to get in and out of holdings, active funds like PSMB can benefit when the markets flux up and down with volatility.

Overall, the fund seeks to provide current income and capital appreciation. PSMB seeks to achieve its investment objective by allocating its assets using a balanced investment style that seeks to maximize the benefits of diversification, which focuses on investing portion of fund assets both in underlying ETFs that invest in fixed-income securities as well as in underlying ETFs that invest primarily in equity securities.

The fund’s target allocation is to invest approximately 45%-75% of its total assets in Equity ETFs and approximately 25%-55% of its total assets in Fixed Income ETFs. One of the highlights of PSMB is its relatively low 0.35% expense ratio that falls below its categorical 0.72%.

PSMB Chart

The Advantages of Multi-Asset Strategies

Russell Investments’ “5 Benefits of Multi-Asset Investing” highlights the need for such a strategy:

“Multi-asset funds can offer investors exposure to a broader range of assets, sectors, strategies and direct investment exposures (e.g. individual securities, bonds) with greater flexibility,” the case study noted. “They are diversified across both traditional and non-traditional asset classes, such as real estate and infrastructure. The goal is to provide the opportunity for growth while carefully managing risk. Of course, diversification and multi-asset investing do not assure a profit or protect against loss.”

“A multi-asset portfolio is designed to navigate potential market shifts through tactical trades, tilts and factor exposures,” the report added. “It has the flexibility to respond to changing market conditions, seeking out areas of greater potential return while attempting to avoid sectors that could add unnecessary risk to a portfolio. Multi-asset solutions rely on dynamically allocating portfolios based on strategy views and outlooks. Therefore there is the risk the perspectives may not be realized.”

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