From Multi-Asset to Multi-Strategy
Chief Investment Officer, Equities and Multi-Asset, Aviva Investors
Multi-strategy portfolios are a natural evolution from multi-asset (aka “balanced” portfolios). Both multi-strategy and multi-asset portfolios invest across a diverse range of asset classes and seek to offer investors more attractive risk-adjusted returns than are available by investing in single asset classes alone. However, in today’s changing market environment, multi-strategy portfolios offer important advantages over multi-asset portfolios.
Aggressive global central bank monetary policy has boosted asset prices in recent years. Equity and bond prices have soared in tandem, while commercial property has also risen strongly. As a result, investing in a traditional mix of assets — equities for capital growth, bonds for income, and alternatives for extra diversification — will reduce a portfolio’s risk by less than it once did.
To pursue their objectives, multi-strategy portfolios deploy multiple interactive investment strategies across and within asset classes, often using financial instruments that are inaccessible to managers of multi-asset portfolios. Because they have the ability to hold both long and short positions, multi-strategy portfolios can perform well in all kinds of market conditions, and their returns tend to be relatively uncorrelated to equities, bonds, and other traditional asset classes.