Skip to main content

You are here

Blog Listing Page

Multi-asset: What’s in a name?

By Penny Ning Pan

Exactly 25 years ago a British ad campaign for a wood varnish succeeded beyond the wildest dreams of the manufacturer. 

Ronseal’s “It does exactly what it says on the tin” campaign turned the conventional marketing campaign wisdom upside down. Instead of promising extraordinary outcomes, the ads’ mundane promise was: this is what you want, so this is what you get. It junked the jargon and left consumers clear about what they were buying.

Sales rocketed, the campaign slogan became one of the most recalled in history, and “it does exactly what is says on the tin” entered the British English vernacular when describing a person, product or process that delivers. It’s even been adopted by political leaders in much the same way ad slogans like "Where's the beef?" have been deployed by politicians in the US.

The financial services industry tries to take the same approach, offering products that deliver as the buyer hoped. But one area where there is still some ambiguity is in the terminology used to define risk tolerance levels.

Terms like “conservative,” “balanced” and “aggressive” are commonly used to define different risk tolerance levels in multi-asset investment products or indexes, but without objective data to back up these definitions. 

The risks of this ambiguity are clear: investors may realize too late that an index or product they have selected is far from their own expectation of the level of risk tolerance the name seemed to imply. In investments, as in other spheres of life, what seems “moderate” through one pair of eyes can be “conservative” in another’s. 

And a related unanswered question is, what are the “market average” asset allocation levels for a conservative or a moderate fund, assuming such an objective definition does exist?

In order to bring some rigor to the process, FTSE Russell takes a volatility-based definition, which we believe cuts through the noise and focuses on what the indexes measure. 

In our approach, we captured all US asset allocation mutual funds from the Morningstar fund database.

We then ranked each fund by 3-year volatility, from most volatile to least volatile. Funds were assigned to one of five volatility quintiles, the least volatile in the conservative quintile and the most volatile in the aggressive quintile: 

  • Conservative
  • Moderately Conservative
  • Moderate
  • Moderately Aggressive
  • Aggressive

For each quintile, the average asset allocation levels of all funds are calculated. The results are market based allocation levels, based on an objective definition of risk tolerance.

FTSE Russell then applies these five sets of average allocation weights to indexes that represent the performance of different asset classes to create the composite multi-asset FTSE US Market Based Allocation Indexesfive indexes ranging from Conservative to Aggressive.


The historic analysis below suggests this approach works for the basket of funds we analyzed, as we saw a clear distribution of average volatilities of cohorts from 2006-2018. So, based on the basket of products we reviewed, investors would have a clearer, objective idea on what “aggressive,” “conservative” or "balanced" means in practice.

The objective definitions and market-based approach means that the FTSE US Market Based Allocation Indexes can offer useful information, but also be performance benchmarks for US wealth managers and financial advisors. So that, for investors, there will be less ambiguity, and multi-asset strategies are more likely to deliver what it says on the tin.



© 2019 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”) and (7) The Yield Book Inc (“YB”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB. “FTSE®”, “Russell®”, “FTSE Russell®”, “MTS®”, “FTSE4Good®”, “ICB®”, “Mergent®”, “The Yield Book®”  and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, FTSE Canada, Mergent,  FTSE FI, YB.  FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.

All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of FTSE Russell indexes or research or the fitness or suitability of the FTSE Russell indexes or research for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell indexes or research is provided for information purposes only and is not a reliable indicator of future performance.

No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this blog or links to this blog or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing contained in this blog or accessible through FTSE Russell indexes or research, including statistical data and industry reports, should be taken as constituting financial or investment advice or a financial promotion.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, MTSNext, Mergent, FTSE FI, YB, and/or their respective licensors.

Blog Listing Page