Smoothing returns in an uncertain environment
Insight Investment has described how retail investors and their advisers can help to smooth returns and maximise certainty in an uncertain market environment.
The asset manager, which had $1.4 trillion in assets under management, said there was a need for innovative solutions beyond traditional portfolios.
There were numerous challenges facing retail clients currently including an ageing population, regulatory changes and macroeconomic challenges such as the Russia/Ukraine war and the COVID-19 pandemic.
Investors were likely to experience more risk for their returns compared to the past 10 years, the firm said.
In order to lessen the impact of these downside risks, Insight said investors or advisers should deploy various strategies that combined both alpha and beta to help smooth returns.
Bruce Murphy, director, Australia and New Zealand, said: “Looking across the areas of market, regulatory and demographic uncertainty, we can readily identify areas where nimble asset allocation, greater implementation efficiency and a simplified re-think of retirement solutions can maximise certainty for investors.
“We seek to deploy a dynamic approach to asset allocation, within a disciplined process, which is less concerned by the constraints of alpha or beta generation, more with understanding how best to manage the reflexive nature of those assets to again deliver more certain outcomes for investors within a tighter expected range of returns.”
This also applied to retirement income solutions, a topical area following the introduction of the Retirement Income Covenant this month, where solutions should utilise access to bond markets.
“Simple, innovative approaches that offer access to fixed income markets via low cost, liquid means can create potential new opportunities for investors seeking to preserve capital but enjoy the benefits of more certain income along the way,” Murphy said.
AUTHOR
Laura Dew
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