Multi-asset allocation faces "simultaneous decline and resonance"; the stability of financial products faces a major test

Reporter: Zhang Xinran

Recently, amid rising global macroeconomic uncertainties, A-shares and various asset classes have experienced a phase of adjustment, with market volatility significantly increasing. Alongside this, the net values of some multi-asset allocation financial products have sharply declined, drawing investor attention.

Multi-asset strategies, once expected to “diversify risk and smooth volatility,” have encountered a “simultaneous decline in stocks, bonds, and commodities” in this market cycle, with some products’ short-term net value declines even exceeding investor expectations.

In response to market changes, several bank wealth management subsidiaries issued urgent statements over the past two days to reassure investors, explaining the reasons for market fluctuations, asset allocation logic, and future outlook, signaling stability expectations. Industry experts believe that the synchronized adjustment of multi-asset portfolios is not only a reflection of short-term market volatility but also a new challenge to traditional asset allocation concepts.

Multi-asset strategies face collective pressure

From recent product performance, most multi-asset financial products are under some pressure.

For example, a leading wealth management company’s “Multi-Asset FOF Balanced Daily Open 3A” employs an FOF model to select managers and diversifies funds across bonds, equities, commodities, and multi-strategy assets, representing a typical “stocks, bonds + commodities” diversified product. Its net value trend shows a clear decline since mid-March. On March 13, the net value was 1.1158, then fluctuated downward, dropping to 1.0934 by March 23, with a cumulative decline of about 2% over the past week.

The higher-risk “Multi-Asset FOF Aggressive Daily Open No. 1” experienced an even more significant decline. This product is rated R4, a medium-high risk level. Data shows its net value was 1.0413 on March 18, then continued to fall, reaching 0.9860 by March 23, breaking below the face value within just a few trading days, with a near 5% phased decline over the past month.

These are not isolated cases. A sales channel representative told Shanghai Securities Journal, “In the past, investors mainly expected stable returns from wealth management products, but during this market volatility, many are experiencing noticeable continuous fluctuations in net value for the first time.”

In this context, on March 24-25, multiple bank wealth management subsidiaries issued urgent responses to market concerns: China Agricultural Bank Wealth Management stated that recent multiple factors have put short-term pressure on the net value of products containing rights, but market fluctuations are normal. The company will continue to leverage professional research capabilities to help investors navigate cycles; ICBC Wealth Management and Xingye Wealth Management also said they will adhere to diversified multi-asset and multi-strategy allocation, strengthening risk management and drawdown control to enhance product stability.

Multiple factors trigger market downturn

Regarding this round of declines, institutions generally believe that the root cause lies in multiple shocks caused by changes in the macro environment.

Agricultural Bank Wealth Management noted that recent energy prices have remained high, boosting inflation expectations. Coupled with changes in Federal Reserve monetary policy expectations, global liquidity has become marginally tighter, and market risk appetite has significantly decreased. The transmission pathway shows that this adjustment has clear resonance: on one hand, rising inflation expectations suppress bond prices, weakening the stabilizing role of fixed income assets; on the other hand, rising corporate costs and tightening financing environment suppress equity market valuations and earnings expectations; additionally, safe-haven assets like precious metals, which had risen earlier, are now profit-taking, further exacerbating market volatility.

Under this backdrop, multi-asset portfolios originally designed to diversify risk have shown phases of simultaneous rise and fall. Zhou Yiqin, founder of Guan Tiao Consulting, told Shanghai Securities Journal that similar synchronized adjustments in multi-asset portfolios have occurred multiple times in history.

“For example, during the 2008 global financial crisis, liquidity dried up, leading to indiscriminate selling of various assets; in 2022, amid Russia-Ukraine conflict and pandemic shocks, the domestic market also experienced a double decline in stocks and bonds,” Zhou said.

Multi-asset allocation logic faces stress testing

This synchronized decline of multi-assets has also prompted reflection on traditional asset allocation frameworks. How to rebalance risk and return in uncertain environments may become the core issue for next-stage multi-asset allocation.

A macro private equity manager told Shanghai Securities Journal that the “All Weather” strategy proposed by Bridgewater Associates has been widely adopted over the past years. This strategy diversifies across stocks, bonds, and commodities to achieve smooth returns in different economic conditions, aiming to build a cycle-crossing investment portfolio. In low-interest-rate and easing cycles, this approach has shown good results: bonds provide stable income as a safety cushion, commodities hedge risks in inflationary environments, and even with equity volatility, the overall portfolio remains resilient. Additionally, multi-asset strategies often leverage low-volatility assets to enhance returns. In low-rate environments, this is cost-effective, but during rate hikes, rising financing costs can significantly erode returns and even trigger passive deleveraging, leading to further net value declines.

“Multi-asset does not mean absolute stability,” the private equity manager said. When macro variables undergo systemic changes, correlations among assets tend to increase temporarily, weakening diversification effects.

For wealth management subsidiaries, this also means new tests: on one hand, they need to adjust asset allocation ratios more flexibly within multi-asset frameworks and strengthen dynamic asset allocation capabilities; on the other hand, they must improve resilience in extreme environments through risk budgeting, drawdown control mechanisms, and other means.

ICBC Wealth Management stated that they will build a multi-asset, multi-strategy allocation system and introduce mechanisms like “layered drawdown targets” to achieve full-cycle risk management; Xingye Wealth Management also said they will enhance product stability and investor experience through fixed income foundations, diversified allocation, and drawdown constraints.