One in three institutional investors say absolute return is their preferred benchmark for multi-asset funds, but they are far from reaching a consensus, according to new research from NN Investment Partners (formerly ING Investment Management).

Almost a third (32%) of the 226 international institutional investors polled said an absolute target return, such as cash plus X% is the most appropriate benchmark for multi-asset strategies.

However a fifth (22%) said a benchmark based on the average performance of peer funds is most appropriate and a further 14% preferred a pre-set target return such as 10% per annum.

One in four investors (24%) said any kind of benchmark at all is irrelevant. A substantial number (43%) said they were considering investing in long/short multi-asset funds with no benchmark or a ‘cash-plus’ target this year.

The research also showed investors were divided on their preferred fee structure and volatility for multi-asset funds.

The 38% of investors that cited a fixed fee with a performance related element as their first choice fee structure were almost evenly matched by the 37% that said a fee based on a fixed percentage of total assets under management. A substantial minority (16%) said they preferred a pure performance fee.

Most (45%) institutional investors said volatility should be no more than plus or minus 10%, 34% said no more than plus or minus 5%, and 10% said plus/minus 4%.

NN Investment Partners said that the research highlights investors’ preference for steady, risk-adjusted returns.

“Controlling risk has become highly important to investors following the global financial crisis. They want decent returns but wish to limit the downsides, too," said Valentijn van Nieuwenhuijzen, head of strategy, multi-asset at NN Investment Partners. 

Nearly two in five (38%) institutional investors said they like multi-asset funds because they provide better risk-adjusted exposure in a low economic environment than other fund types. 

Most (71%) believe risk-adjusted multi-asset strategies are now a necessary complement to fixed income portfolios in the current low yield environment.