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Beyond Labels: Navigating the Multi Asset Universe
The universe of strategies that invest across multiple liquid asset classes is increasingly large, diverse and complex. A new taxonomy helps investors to understand the space and develop a robust approach.
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IN THIS PAPER
‘Outcome-oriented’ focus. Asset owners are increasingly seeking to invest in a strategy-agnostic manner, focusing on risk and return profiles rather than labels. As a result, it is important to be able to consider a diverse group of multi-asset strategies side by side in outcome-oriented manager searches.
A new taxonomy. Investors can conceptualise the liquid multi-asset universe using a new schematic which features eight distinct categories – not including ‘outsourced CIO’ models – and nineteen sub-categories. This spectrum can be divided, crudely, into long-only (or long-biased) and absolute return approaches.
Vital statistics. 'Key facts’ sections showcase returns, volatility, Sharpe Ratios, numbers of institutional-quality managers available to investors and more.
This brief report seeks to provide a helpful, practical guide to investors that seek to navigate the multi-asset sphere. In Seven Shades of Multi Asset (bfinance, 2018) we introduced a framework for understanding the landscape of multi-asset strategies. This new article extends the framework to provide more granular classification and further detail across all categories.
Yet why should investors seek to understand the multi-asset universe – not just the strategies that bear a ‘Multi Asset’ product label or one of the associated sub-labels (such as ‘Diversified Growth’ or ‘Risk Parity’) – in its entirety? Firstly, it is helpful to approach multi-asset investing in a ‘strategy-agnostic’ manner. Secondly, sophisticated investors may not have a specific allocation target for multi-asset strategies and may use them for different reasons. Thirdly, examination of the full spectrum helps to unpick some common misconceptions.
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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
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