We think the conditions we face lay the foundations for a more dynamic absolute return approach that can capture diverse opportunities across asset classes while protecting against downside risk.
We want more alpha not beta
An absolute return multi-asset approach can benefit from a significant exposure to cash, cash-like instruments and bonds alongside capturing upside opportunities using derivatives, as well as carefully deploying cash into attractively valued assets.
This can provide superior upside and downside protection in comparison to holding cash through its diversified nature. A dynamic portfolio can provide a combination of direct and indirect hedges, offsetting some of the risk created by market volatility.
While there are fewer market participants offering absolute return multi-asset strategies today, given the headwinds over the past decade, we believe this skill-set is more relevant now than ever before.
Mitesh Sheth is chief investment officer for multi-asset at Newton Investment Management
