Resilience through diversification: Why multi-asset matters now

In a world where headlines can now shift markets overnight, we are reminded of the value of diversification. Indeed, the past few months have been alive with market volatility centred around trade tariff news. Weeks of speculation culminated in early April when the new US administration announced a sweeping range of tariffs for countries across the globe that were unprecedented in their range and scale.

The announcement invoked volatility across multiple asset classes as investors scrambled to assess the implications and the likelihood of retaliatory tariffs from affected nations. Global equity markets declined sharply in the immediate aftermath, with US tech names leading the decline while cyclical sectors such as financials and autos also struggled. Bond markets were also affected, with government bond yields falling as investors flocked to traditional ‘safe haven’ assets amid the heightened uncertainty. Currency markets also responded dramatically. The Canadian dollar and Mexican dollar – notably currencies of countries with close trading relationships with the US – both hit one-month lows in the immediate aftermath.

By early May, the picture began to look a little more positive. The UK became the first country to secure a trade agreement with the US, while Washington and Beijing reached a truce to reduce import tariffs on bilateral trade – the latter of which saw US equities rally and recover all their losses this year. Attention has now turned to which nations might follow suit. Importantly, however, the full impact of the tariffs is still unfolding. We are yet to see whether tariffs on different countries will be sustained, expanded or rolled back – and whether markets will stabilise or remain volatile for some time.

These past few months have been a strong reminder that market volatility is a natural part of investing. They’ve also highlighted the importance of diversification to navigate through this. We believe that multi-asset funds offer a solution here, by giving clients access to professionally managed, diversified investment portfolios designed to perform across varying market conditions.

Investors are human, and of course it’s natural for fear and uncertainty to creep in around choppy markets. But this can lead to reactionary behaviour, such as panic selling or attempting to time the market – both of which can erode portfolio value. We believe the diversification offered by multi-asset funds can also support clients from a behavioural perspective – by providing peace of mind that their risk is adequately spread, thereby helping to reduce anxiety and reinforce the importance of staying invested for the long term.

Additionally, within a multi-asset fund range, it’s common to find a suite of portfolios designed to cater to different levels of risk tolerance and investment goals. These typically range from lower-risk options with more conservative asset allocations, to higher-risk portfolios aiming for greater long-term returns. This flexibility allows advisers to help clients choose a strategy that aligns with their financial objectives and comfort with market fluctuations, while still benefiting from the diversification and behavioural support that multi-asset investing provides.

These past few months have been a strong reminder that market volatility is a natural part of investing.

Indeed, the initial rise of multi-asset funds in the early 2000s was partly driven by economic uncertainty and geopolitical tensions, which made the concept of a smoother investment experience during periods of heightened volatility especially appealing.

Notably, the 2008 Global Financial Crisis highlighted the importance of true diversification, as supposedly uncorrelated assets such as equities, corporate bonds, and real estate fell together. Portfolios heavily weighted toward riskier assets suffered most, underscoring that true diversification requires more than asset class variety; it demands a thoughtful mix of assets that behave differently under stress, helping to cushion portfolios during market downturns.

Amid the recent market volatility, the value of staying anchored to long-term investment principles remains as clear as ever. We believe that diversification remains a solution to manage such volatility, and multi-asset funds, with their ability to blend different asset classes and geographies, offer a robust way to help clients navigate uncertainty.