Glenn Freeman: I'm Glenn Freeman for Morningstar, and I'm joined today by Simon Doyle, head of fixed income & multi-asset with Schroders.

Now, Simon, just firstly, on the multi-asset side of things, how popular is this approach with retail investors and have you had to adapt this to be more popular with that segment?

Simon Doyle: Well, certainly, I think, multi-asset generally has adapted quite significantly over the last probably eight to 10 years and certainly, we started really evolving our approach probably around 2007-2008 moving away from the traditional balanced fund structure towards an objective-based portfolio approach. And we did that really to try and solve some of the problems that were inherent to the traditional balanced structures and really align with the sorts of issues that our investors were facing and that was how to deliver decent positive rates of return without the volatility that you typically get with a balanced portfolio and without the drawdowns that sort of come with that. And so, that's been the main sort of evolution of our multi-asset approach.

Freeman: What are some of the main trends that we're seeing there? Is it that drive to reduce costs and fees for investors or are there other things happening as well?

Doyle: Well, I think, pressure on costs and fees are--they are industry-wide, they are sector-wide. They are not really unique to multi-asset. I think within multi-asset I'd say probably the single most evident thing that's happening is really innovation. In the last five or six years, there has been a plethora of new strategies launched into the domestic market available to domestic investors, both institutional and retail, objective-based portfolios. So, like ours, where a lot of the value is really through managing asset allocation and making sure we're in those, sort of, right parts of the market at the right time. We're seeing the development of strategies that are very much dependent on cross-market or relative value trades and that's sitting alongside risk parity-type approaches or even sort of combinations of the three. And so, I think, competition and innovation, I think, is really driving multi-asset managers to continue to deliver interesting strategies that really try and solve the core problem that investors have in different ways.

Freeman: From a retail perspective, who is your audience and has there been much popularity among SMSF trustees?

Doyle: Well, from a multi-asset perspective, I think our core constituency, if you like, in terms of the natural investors in these types of strategies is relatively broad, but probably focused on investors who are coming up towards retirement and really don't want to see sort of big drawdowns from capital; investors who are maybe post-retirement and are looking at generating decent income without significant volatility; investors who are indifferent to what they own, so they're not worried about whether it's equities, bonds, property or what have you, what they are worried about is the profile of the returns of their investment, the income that that delivers; or investors that actually otherwise have relatively narrow portfolios that don't have a lot of--are unable to get a lot of diversification. And I think it's that latter category that sort of captures a lot of the self-managed super market where they may have relatively concentrated portfolios but are looking to find a way to diversify their exposure. And multi-asset strategies like our Real Return Fund actually do have some appeal for them to be able to do that.

Freeman: And just lastly, some market commentators have been quite dismissive of active investment approaches with index managers having done quite well in recent times. How do you respond to that?

Doyle: Well, if I put my multi-asset portfolio manager head on, I actually think that sort of the active versus passive debate is a bit of a distraction. It focuses very much at the sector level in sort of equities or bonds. It suffers from I think, what I call, a recency bias and that's very much dependent on the performance of active and passive managers in the most recent couple of years and I think it ignores risk, particularly the sort of risk that's been brought to bear on markets based on the behaviours of central banks.

So, as a multi-asset portfolio manager who is looking to deliver absolute outcomes for their clients, there isn't a passive portfolio that I can own. So, I need to take active risk all the time to be able to do that and do that via asset allocation. And all portfolio constructors need to be active in a way they think about asset allocation simply because there isn't that neutral portfolio.