This tutorial will walk you through the filters specific to Multi-Asset ETFs you can choose from when screening for Multi-Asset ETFs. AlphaBeta ETF identifies Asset Class Exposure and Allocation Strategy as the foundation to look for the right Multi-Asset ETF for you.
What are the Multi-Asset-specific filters I can use?
Asset Class Exposure: Traditional Multi-Asset ETFs offer a one-stop solution by combining fundamentally different types of investments, such as stocks, bonds, and cash, within a single portfolio. Some specialized Multi-Asset ETFs focus on different ways to gain exposure to the same underlying asset.
Traditional Multi-Asset ETFs
Description: The goal is to balance the growth potential of equities with the income and stability of fixed income, often following a specific risk profile or allocation strategy (see the below session on Allocation Strategy). By holding assets that typically do not move in perfect tandem, these ETFs aim to reduce overall portfolio volatility and provide more consistent returns across various market environments.
Specialized Multi-Asset ETFs
Description: These ETFs combines different asset classes, such as commodity with mining stocks (equities), that are driven by the same underlying asset or theme. In this example, while both are tied to the price of commodity, the mining stocks provide operating leverage, while the commodity provides a direct exposure. This approach allows investors to capture different layers of risk and reward related to a single theme or resource within a single instrument.
Allocation Strategy: Different Multi-Asset ETFs have different approach towards allocation by asset class or investment objective. The allocation in each asset class could be within a specified range or flexible.
Predefined Mix: Aggressive / Moderate / Conservative Equity
Description: These ETFs adhere to a fixed, predefined mix of equities and fixed income to maintain a consistent risk profile over time. Strategies are often labeled to guide investors: an Aggressive fund might hold 80% stocks/20% bonds to maximize capital growth, a Moderate fund could use a 60/40 blend for a balance of growth and income, and a Conservative fund might allocate below 40% in stocks to prioritize capital preservation and stability.
Example: Aggressive – iShares Core 80/20 Aggressive Allocation ETF [AOA]; Moderate – iShares Core 60/40 Balanced Allocation ETF [AOR]; Conservative – iShares Core 30/70 Conservative Allocation ETF [AOK]
Investment Objective: Appreciation / Income / Income-Appreciation / Target Date
Description: These strategies focus on achieving a specific investment objective rather than adhering to a strict asset mix. Appreciation funds prioritize long-term growth, often tilting toward higher-risk assets. Income funds focus on generating consistent cash flow through dividends and bond coupons. Income-Appreciation funds seek a hybrid approach. Target Date funds dynamically shift their allocation from growth-oriented, high equity allocation to conservative, high bond/cash allocation as the investor approaches a specific retirement year.
Example: Appreciation – SPDR SSgA Global Allocation ETF [GAL]; Income – Invesco CEF Income Composite ETF [PCEF]; Income-Appreciation – WisdomTree U.S. Efficient Core Fund [NTSX]; Target Date – iShares LifePath Target Date 2035 ETF [ITDC]
Dynamic
Exposure: Long
Description: Dynamic long ETFs maintain a portfolio of assets that are held outright without short selling, but the manager actively adjusts the percentage allocated to stocks, bonds, commodities, etc., based on changing market conditions. The goal is to tactically increase exposure to asset classes that are expected to outperform while reducing exposure to those expected to underperform, always maintaining a positive-sum or long position.
Example: HCM Defender 100 Index ETF [QQH]
Exposure: Absolute
Description: Absolute return Multi-Asset ETFs employ sophisticated strategies that include both long positions (betting an asset will rise) and short positions (betting an asset will fall). This approach provides managers with the flexibility to generate positive returns regardless of whether the overall market is rising or falling. By using short selling and other derivatives, these funds aim for a lower correlation to traditional benchmarks and can better manage volatility, though they often come with higher fees and complexity.
How to pick the right combination of the above Multi-Asset-specific considerations?
Understanding your exposures
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Age and Risk Appetite: Your age remains a primary determinant of asset class exposure, typically following a lifecycle approach where the capacity for risk diminishes as one nears retirement. Younger investors with long time horizons often favor high-growth assets, as they have time to recover from market drawdowns. As investors age, they generally shift toward conservative allocations with higher concentrations in fixed income and cash equivalents to protect accumulated principal and ensure reliable liquidity for upcoming life stages.
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Return vs Risk Levels: The fundamental trade-off between return targets and risk tolerance dictates whether you should choose a static or dynamic allocation strategy. Those with a high appetite for risk may opt for strategies that aim to maximize gains, accepting that these strategies carry a higher volatility or probability of significant losses. Risk-averse investors prioritize income or capital preservation targets, selecting allocations that offer a narrower range of outcomes but provide greater psychological and financial security during volatile market cycles.
Macroeconomic conditions
Macroeconomy and market conditions: The ideal choice of Multi-Asset ETF differs depending on the outlook of the economy. Considerations include economic growth and inflation environment.
Economic Growth
During an economic expansion, managers typically increase exposure to equities and higher-yielding corporate bonds to capture growth and capitalize on rising corporate profits. As the cycle matures or signals a recession, allocations are often defensively rotated into high-quality government bonds and cash to prioritize capital preservation during downturns.
Inflation Environment
The traditional diversification benefit of a 60/40 stock/bond portfolio can break down during periods of high or sticky inflation, as both asset classes may decline simultaneously. With inflation a persistent concern, multi-asset ETFs that diversify by adding uncorrelated asset classes such as real estate, infrastructure or commodities could enhance the risk-return profile. These alternative investments act as a hedge against rising prices, helping to smooth portfolio volatility and preserve real returns when traditional correlations converge.
Absolute Return Strategies
To manage volatility and provide consistent returns regardless of market direction, some multi-asset strategies incorporate low Beta or absolute return components, e.g. Simplify Managed Futures Strategy ETF [CTA] / iMGP DBi Managed Futures Strategy ETF [DBMF]. These ETFs employ systematic, trend-following strategies that can go both long and short across futures markets for currencies, commodities, and bonds. Because their performance is based on capturing market trends rather than traditional market exposure, they offer a genuine source of diversification and act as a potential crisis alpha generator during periods of equity market stress.