A number of multi-managers have introduced dynamic asset allocation (DAA) to their portfolios in response to market conditions, according to a Lonsec report on the sector.

"The market conditions in 2008 and 2009 saw managers look for ways to reduce risk and take advantage of the severe mis-pricings that were becoming apparent following the global financial crisis," Lonsec senior investment analyst Deanne Fuller said.

"These managers have been looking back and seeing what works and what doesn't. We are seeing an increasing adoption of dynamic asset allocation among multi-managers.

"Unlike tactical asset allocation, dynamic asset allocation is considered over the medium term and recognises that often there will be long periods of time where no positions at all are taken."

Fuller said Russell and MLC had both introduced DAA processes in the past year.

Intech (now Ibbotson Associates) and Mercer have been running DAA processes since early 2008 and mid-2004 respectively.

The Lonsec report, however, said the research firm was yet to fully monitor the processes behind DAA.

"In most cases the introduction of DAA is as yet untested with only a few positions implemented to date," the report said.

"Lonsec would prefer to monitor the performance of these strategies before making a full assessment."

The report found MLC was the largest multi-manager in Australia with $75 billion in funds under management. The other large firms include AMP with $22 billion, Russell with $21.7 billion, Colonial First State with $15.7 billion and ipac/Axa with $13.5 billion.