Research indicates that achieving the correct asset allocation is the most important factor in generating long-term returns and that diversification is the best way to achieve risk-adjusted target returns. As such, our portfolios are designed to provide investors with exposure to a broad range of investments representing different asset classes that are likely to have a low correlation in terms of performance. This is commonly known as a ‘multi-asset’ approach to investment. The rationale is that in most market conditions at least some components of a portfolio should be delivering positive returns. However, it should be noted that in extreme market conditions, especially when market liquidity is low some asset classes can display high levels of correlation.
The four primary asset classes on which our portfolios are configured are global equities, fixed interest securities (government and corporate bonds), liquid alternatives (property, absolute return funds, commodities etc.) and cash.
Investors requiring a higher risk and return offering are likely to have a greater exposure to equities than a more cautious investor who is likely to have a greater exposure to fixed interest securities. The precise weightings of different asset classes within each portfolio are based on our analysis of long-term returns and risk.