Benefits of a global approach are now clear for investors

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Some investors may still be anxious about investing overseas due to their perception of it being a risky proposition, but blending different asset classes from around the world can actually reduce volatility – as well as helping generate a decent level of return.

That’s the view of Justin Onuekwusi, a multi-asset fund manager with Aviva Investors, who maintains that the way to achieve the very best risk-adjusted returns is to invest in a globally unconstrained way that combines areas as varied as equities, bonds, real estate and commodities.

“Investors should always take a global approach – but an issue has been that a lot of the asset classes you see nowadays simply weren’t investable 10 to 15 years ago therefore the universe of asset classes was much smaller,” he says. “Now as it is easier for investors to access asset classes such as commodities or global convertibles it’s something they should consider.”

The principle benefit is diversification. Although the business cycles of various countries are becoming more harmonised, blending asset classes from different regions can provide much needed exposure to a very different sort of risk and return profile.

Balance sheets in the west are bloated because everyone has borrowed too much, according to Mr Onuekwusi, but within the emerging markets, many governments are in much better shape. To benefit from this scenario, an investor will need to take an international approach.

“Having a larger, more global universe means you can spread your risk over a number of asset classes and have more levers to pull in order to help achieve the objectives for your clients,” he explains. “It just makes the job a bit easier and should give investors a smoother ride.”

Another trend that has helped people take a global approach has been passive investment. “You can get an Exchange Traded Fund on almost any regional equity index in the world these days – and if you can’t then one can be created for you,” he says. “This liquidity and availability has made it so much easier to access various markets quickly and efficiently.”

Aviva Investors takes a very long-term approach to investing and provides access to more than 100 asset classes. For prospective investors the benefits it provides include scale – it manages in the region of £70bn in multi-asset funds – and its focus on utilising the skills of specialists.

“It’s very important to have people on the ground if you’re going to run truly global portfolios, while scale also makes a difference,” says Mr Onuekwusi.