Lonsec positions managed accounts for political storm
Lonsec has unpacked what investment tools it is harnessing to mitigate the impact of geopolitical risks as financial advisers do the same for their clients.
Speaking on a Lonsec managed portfolios quarterly update for Q3 2024, Lonsec deputy chief investment officer Deanne Baker recognised the drivers of global volatility, such as the upcoming US election and beyond.
“There’s a lot to be concerned about outside of the US election. We’ve got a number of wars still running wild – there’s plenty to be concerned about,” she said.
The firm offers a range of managed accounts for financial advisers, from tailored managed accounts to ready-made ones and individually managed accounts.
When asked what tools do portfolios have to manage rising geopolitical risks, Baker pinpointed diversification through certain assets, including alternatives, bonds and gold.
“In respect to the election, the first pillar is diversification. That’s the first pillar we always rely on, [to] combine assets in a way that helps us manage through these ups and downs, including geopolitical events.
“For multi-asset portfolios, we take it a step further and we have even higher allocation to alternatives which are lowly correlated or even negatively correlated assets that work well if we do encounter periods of market stress,” she explained.
Research from Praemium and CoreData earlier this year discovered that there has been a 23 per cent rise in funds allocated to alternatives over the past year, as the asset class approaches $6 billion in funds under administration.
More recent findings from Praemium and Investment Trends show that 146,000 high-net-worth individuals are currently investing in private markets, with 32 per cent planning to increase their investments in the next year.
Baker also said that Lonsec is utilising bonds and gold as two portfolio diversifiers amid market volatility.
She continued: “Across all portfolios, we have bonds which play that risk diversification role, which they haven’t done for a few years now given the inflation environment.
“Of course gold has been a very effective tool for us over the last 12 months. Having gold across most of our portfolios has really helped manage that geopolitical risk.”
Moreover, having a strong focus on investments in high-quality companies that are resilient against geopolitical risk has been critical, the deputy CIO added.
“One of the other factors that we have across all our portfolios is a real focus on quality as well. We invest across companies that really do have strong balance sheets and strong cash flows. Those companies are really designed to withstand minor or major stresses in sentiment as we move through these typically elevated periods of volatility.”
As greater economic volatility, higher cost of living and interest rates cause concerns for local investors in Australia, Natixis Investment Managers recently found that 85 per cent of clients are asking if they will reach their goals and 77 per cent are asking if they are protected from market downturns.
“With the current economic environment creating uncertainty among investors, utilising an adviser is one of the best ways Australians can ensure they will achieve their financial goals,” said Louise Watson, Natixis country head for Australia and New Zealand.
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Jasmine Siljic
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