“An effective portfolio has the two elements evolving and working together. In years like 2015, 2011 and 2008, taking meaningful asset allocation decisions to reduce risk has helped defend clients’ capital through stressful markets.”
With asset classes moving in cycles, and macroeconomic factors sometimes hindering performance, adapting to changes such as lower interest rates means understanding the correlation between asset classes, and not just adding positions for the sake of it.
Mr Ramjee adds: “The relationship between assets is not stable. Understanding these relationships helps one understand that diversification needs to be active. Different managers will provide different services – some will reduce volatility at any cost, that cost likely being returns. Others understand that growth is often a requirement for investors.
“We want to avoid disastrous outcomes, but a degree of risk is required to generate growth returns. Our role is to understand the most appropriate way to generate that growth, being mindful that cycles will turn, and that protection against volatility is required.”
With central bank policy continuing to diverge, it is no surprise multi-asset funds remain popular, with the latest IA statistics showing mixed-asset products were the third best-selling grouping in July with net retail sales of £195m.
Ms Bliebenicht concludes: “Increased investor demand and the associated different client needs accelerated the evolution of multi-asset away from a traditional approach with allocation driven by historical returns, to the flexible multi-asset investment solutions we employ today.
“Since the financial crisis, the focus on achieving good risk-adjusted returns has increased, and today’s multi-asset solutions aim to deliver through dynamic asset allocation, driven by prospective return assumptions and considering allocation and management of investment risks in the portfolio, rather than return alone.”
Nyree Stewart is features editor at Investment Adviser