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
Retailisation of private markets such as evergreen funds may seem like appealing options for wholesale and retail investors, but providers risk undermining trust if their products are unclear.
Ethical investment manager Australian Ethical has seen its funds under management rise by a third over FY25 to close out the year at $13.9 billion.
BlackRock Australia’s head of intermediary distribution James Waterworth has taken up a new distribution role at an alternative asset manager, while Antipodes has hired a distribution director.
BlackRock’s iShares ETFs have reported a record first half for inflows, gaining US$192 billion in the past six months, to see overall ETF assets under management rise to US$4.7 trillion as it launches its first active ETF in Australia.
