TAA back in fashion
Tactical asset allocation (TAA) is coming back into vogue in an environment of higher volatility and lower returns, according to Barclays Capital’s director of funds business, Caroline Saunders.
Speaking at the PortfolioConstruction Conference in Sydney yesterday, Saunders said manager selection was much more in favour in the 90s because most asset classes performed well and the adage ‘time in the market’ rang true.
“Long only investing served people well and TAA provided minimal if any alpha generation,” she said.
However, Saunders asserted that the landscape has changed and in an environment of constrained returns, market volatility and much greater cyclical swings, anything that could improve returns would prove more valuable.
“There is more opportunity for TAA to add value. The 90s ‘buy and hold’ strategy won’t work so well in this environment.”
Saunders said TAA was previously considered too difficult. However, she said increased volatility and more asset classes to choose from provided TAA with greater ability and an expanded scope to add value.
“Investment markets are not efficient and irrational investors can impact markets quite significantly,” she said, asserting that many underestimate risk in portfolios.
“Large daily swings have a significant impact on long-term performance, and investors stumble on Black Swans and large swings more often than they expect.”
Recommended for you
Blackwattle Investment Partners has hired a management trio from First Sentier Investors – who departed amid the closure of four investment teams last year – to run its first equity income offering.
Private markets manager Fortitude Investment Partners has launched an evergreen small-cap private equity fund.
After passing $300 billion in funds under management, Betashares is forecasting the Australian ETF industry could reach $500 billion by the end of 2028.
Ausbil is to expand its active ETF range with two ASX-listed launches, one focusing on global small caps and one on listed infrastructure.
