The number of multi-asset fund launches has accelerated this year, following the introduction of pension freedoms, begging the question: how many vehicles in the burgeoning sector can thrive or even survive in the longer term?
J.P. Morgan Asset Management has been one of the few groups so far to admit defeat in trying to drum up assets for small funds in this space.
It recently announced plans to close Tony Lanning's £54m multi-manager Fusion Funds range, saying it has failed to gain traction in the market after launching in March 2013, despite the manager being well-known to retail investors.
But the funds are part of a relatively long list of multi-asset products below £10m in size, according to figures compiled by Scopic Research for Investment Week.
Its data shows that around 12% of all multi-asset funds of funds from a universe of 600 have assets below £10m (as at 30 September, according to FE Trustnet figures), while a further 16% have AUM between £10m and £25m.
The largest portfolio in JPMAM's Fusion range was its Balanced fund at £23m, so there is no reason why other funds under £25m could not be vulnerable to potential closures – in other words, 28% of the universe.
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These types of products remain popular with investors, with funds of funds seeing £1bn in net retail sales in Q3, and £1.2bn the previous quarter, according to The Investment Association.
However, as with many parts of the retail industry, flows still gravitate towards some of the bigger players in the sector, which are also better placed to weather outflows at different points in their cycle.
As Paul Ilott, managing director at the research firm, points out: "A large outflow from a very large fund may only reduce its size by a small percentage amount. While the Jupiter Merlin portfolios saw the largest combined outflows for a multi-asset fund range over the year to the end of September, this will have had little impact on how the funds have been managed.
"In contrast, a large outflow from a relatively small fund will have a significantly greater impact in percentage terms that could, potentially, impact its ongoing viability."
Pension freedoms have given a valuable boost to the multi-asset sector, but differentiating rival propositions appears harder than ever. Strong risk-adjusted performance may not be enough to guarantee survival and a long tail of small funds look particularly vulnerable.
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