As managers change portfolio asset allocations, correspondingly they also need to review the underlying strategies and investment manager products that they employ, and to make changes where they need to bring in different skills and exposures. So managing for responsible income means constant monitoring and re-evaluation, as managers continually balance the requirement for yield, the importance of total return, and an acceptable level of volatility.
I believe that an actively managed, globally diversified multi-asset income portfolio is the efficient solution for pension investors in the new age of pension freedoms. By opting for a multi-asset income strategy, pension investors can delegate to experts the multiple complex and demanding investment issues such as asset strategy, asset class correlations, constant monitoring, dynamic management and efficient trading. Of course, in an era of falling yields across multiple asset classes, multi-asset income strategies may not be able to deliver the level of yield pensioners want, nor with the level of volatility that they always find comfortable. But properly designed, constructed and managed, they can deliver a responsible income flow while preserving capital in the long term.
Mirko Cardinale is head of asset allocation Europe, the Middle East and Africa, at Russell Investments
Key points
Choosing an actively managed, globally diversified, multi-asset income strategy, it is still possible to achieve a realistic income yield.
Managers need a clear set of strategic beliefs about how different assets perform and which risks will be rewarded under different market conditions.
Because yields are changing all the time as market prices move, dynamic management is particularly important for multi-asset income portfolios.
